March 04, 2021 |James Messi
In this article, we dive into the large corporations and financial institutions that have taken a position in BTC. Since Bitcoin launched in 2009, “institutions are coming” has been a rallying cry for holders yet brushed off as nothing more than a meme for everyone else. Now that the world’s largest firms are buying Bitcoin, it’s important to consider the reasons why and map out what it means for the future of cryptocurrency.
Why Are Institutional and Corporate Firms Buying Bitcoin?
Elite firms are buying bitcoin in increasingly large sums for multiple reasons. In the case of hedge funds and asset managers, it is a purely speculative play. These types of firms have taken billions of dollars worth of positions both long and short in BTC. Hedge funds sat on the sidelines for years waiting for bitcoin’s market to mature. At long last, these large-cap cryptocurrencies are beginning to fall squarely within their risk appetite.
On the other hand, leaders of publicly-traded companies like Michael Saylor and Elon Musk have begun moving reserve funds into bitcoin as a protection against continued inflation of the U.S. dollar. Corporations traditionally kept their cash in commercial bank accounts or low-risk money market funds. With inflation on the rise as more USD are pumped into circulation, these once seemingly safe havens are getting riskier. To put this into perspective, TheStreet reported in October 2020, that 23% of the current total supply of USD had been created in the 12 months that preceded their report. Like long-term holders of bitcoin, these corporations are simply trying to protect their purchasing power.
In many other cases, large financial and investment firms like Mastercard, PayPal, and the Bank of New York have noticed and are reacting to the uptick in both retail and institutional adoption of Bitcoin. Their plans to better serve these fast growing client interests have been telegraphed in press announcements stating that they are committing a significant portion of their resources to building out mainstream payment and custody solutions that will support several large-cap cryptocurrencies and stablecoins. For example, a near future where certain cryptocurrencies are accepted everywhere Visa and MasterCard are accepted is rapidly coming into view.
The Largest Firms Buying Bitcoin Right Now
While all eyes in crypto are looking for the next institutional firm that will buy or build around Bitcoin, let’s take a look at some of the biggest players who have already staked a claim on the future of value. From crypto-centric firms like Grayscale to the world’s largest asset manager, BlackRock.
Grayscale was the first institutional player to make the leap into cryptocurrency when they launched the Grayscale Investment Trust, opened as The Bitcoin Investment Trust on September 25, all the way back in 2013. Flash forward to now, Grayscale has opened additional funds for Ethereum and other large-cap cryptocurrencies. As of December 2020, the investment firm was overseeing more than $13B of digital assets.
Galaxy Digital Holdings
Galaxy Digital Holdings is another crypto-centric investment firm that was relatively early to the party. Founded by noted crypto billionaire, Michael Novogratz, Galaxy Digital launched the Galaxy Bitcoin Fund and Galaxy Institutional Bitcoin Fund in November of 2019. Noting the reasons for opening the fund, Galaxy Digitals Head of Asset Management said that, “”The Galaxy Bitcoin Funds help accredited investors mitigate the complexities and risks of managing direct bitcoin investments. The funds provide investors bitcoin exposure with institutionally secure third-party custody, best-in-class service providers, and Galaxy’s platform support.”
In November 2020, Galaxy Digital reported $527M in assets under management.
MicroStrategy is primarily in the business of selling cloud-based business analytics software. The tech company has been in crypto headlines since announcing that treasury reserves would be moved into Bitcoin.
As of February 2021, MicroStrategy has accumulated a staggering 71,079 BTC. If the simple fact that they are buying this much bitcoin isn’t bullish enough, the company’s CEO and bitcoin’s primary institutional evangelist, Michael Saylor, revealed that he personally bought 17,732 BTC at an average price of $9,882 and has been advising other large companies on how they should approach an investment in bitcoin.
MicroStrategy held a Bitcoin for Corporations event as part of its World.Now conference in February 2021. The coming weeks and months will prove which of the attending corporations took Saylor’s advice and added bitcoin to their balance sheet.
In what was arguably the most bullish headline crypto has ever seen, Tesla announced in an SEC filing that they had purchased $1.5B of bitcoin.
This piece of news came following an interesting exchange on Twitter between Tesla CEO, Elon Musk and Michael Saylor.
Wondering if the market was deep enough for a buyer as big as Tesla, Musk asked Saylor if billion-dollar buys are even possible.
Saylor replied with, “”Yes. I have purchased over $1.3 billion in #BTC in past months & would be happy to share my playbook with you offline – from one rocket scientist to another.”
A few days later, Tesla was sitting on $1.5B worth of bitcoin.
The news that Tesla owns bitcoin had a positive impact on the price of both Tesla stock and bitcoin. Every Tesla shareholder is now indirectly invested in bitcoin. This also serves as a signal to other corporations that the equity market looks favorably on companies that buy bitcoin.
BlackRock is the world’s largest asset management company with more than $8 trillion in assets under management. In what may prove to be the tipping point for institutional money flowing into bitcoin, BlackRock announced in January that two of its funds were cleared to trade in the bitcoin future markets. The funds named in a report filed with the SEC are the BlackRock Global Allocation Fund and BlackRock Funds V.
This came as a surprise to many in the bitcoin community as BlackRock has dismissed bitcoin for having high volatility and regulatory challenges. Opening funds to trade bitcoin futures is likely the result of growing demand from BlackRock’s clients to gain exposure to cryptocurrency.
There hasn’t been confirmation that these funds have started trading bitcoin futures but the SEC filing suggests that it’s only a matter of time.
Which Firms Are Next?
We’ve highlighted the investments in bitcoin from some of the world’s largest financial firms and publicly traded companies. Now, we’ll take a closer look at the financial and tech titans who are currently working to build a mainstream payment infrastructure around cryptocurrencies.
Following bullish momentum from headlines surrounding MicroStrategy’s bitcoin investment, PayPal caused bitcoin’s price to surge in October 2020, when the payments giant announced that customers could buy, hold, and sell cryptocurrencies from their PayPal account.
That alone is great for the adoption of cryptocurrency. PayPal added that it plans to make crypto easier to spend by enabling its 26 million merchants to accept it as payment. They also have plans to enable Venmo account holders, of which there are 40 million, to send and receive cryptocurrency.
Mastercard decided it was their turn to steal the crypto spotlight by announcing support for cryptocurrency payments in a post put up on the Mastercard Newsroom containing the following statement:
“We are preparing right now for the future of crypto and payments, announcing that this year Mastercard will start supporting select cryptocurrencies directly on our network. This is a big change that will require a lot of work. We will be very thoughtful about which assets we support based on our principles for digital currencies, which focus on consumer protections and compliance.
Up to this point, credit card processors had been reluctant to support cryptocurrencies in any meaningful way and even went to great lengths to block their customers from buying bitcoin.
Gaining support from Mastercard and other payment processors will only make it easier and more affordable for the masses to buy and spend cryptocurrency.
The Bank of New York Mellon
The Bank of New York Mellon was founded by Alexander Hamilton, is America’s oldest bank, and the world’s largest custodian bank. One day after Mastercard announced support for crypto, the custody bank laid out their plans to begin holding and transferring cryptocurrencies on behalf of its asset management clients.
Devoting resources to building systems that can operate around cryptocurrency implies a growing demand among asset managers who are looking for a safe place to store their crypto. BNY Mellon has been a trusted custodian among other financial institutions and could be exactly what some large players need to feel safe investing in cryptocurrency.
What Does This Mean for the Future of Bitcoin?
Bitcoin has been in a bullish uptrend since hitting a bottom near $3,500 last March. Prices continue to surge as new institutional players are entering the space on a daily basis. Bringing with them a lot of cash to invest and seemingly unlimited resources to build. Looking out a year or two from now, it’s not hard to imagine bitcoin’s network effects reaching mass adoption.
Two major obstacles to adoption in previous years has been a lack of institutional investment that would support markets with large buyers and adequate liquidity. As well as the general complexity baked into crypto transactions that make them complicated and risky to those without a deep understanding of blockchains.
We are now seeing both of these barriers coming down in real-time with institutions shoveling billions into bitcoin and mass-adopted payment networks like Mastercard, PayPal, and Venmo making it easier for their retail customers to get in the game. We can never be certain of where bitcoin is headed, but its future has never looked brighter.