The institutional investors are there

Billionaire hedge fund manager Paul Tudor Jones said his investment portfolio consists of 1 to 2% bitcoin. Wall Street veteran George Ball has also turned around and says he expects more and more investors to take refuge in bitcoin. In the meantime, interest in the investment fund Grayscale Bitcoin Trust (GBTC) has grown considerably and the fund now manages around EUR 4 billion in BTC. The institutional investors are not coming; they are already there.

Over the years, much has been written and speculated about the arrival of so-called ‘institutional investors’ and what effect they will have on the bitcoin market. Yet more and more often it appears that some of them are already there.

Paul Tudor Jones

For example, billionaire hedge fund manager Paul Tudor Jones recently told CNBC that he has invested 1 to 2% of his investment portfolio in bitcoin. Paul Tudor Jones is praised, among other things, for predicting the stock market crash of 1987 and, according to Reuters, he is one of the ‘great legends’ of Wall Street.

Jones has been skeptical about bitcoin in the past, but says he has changed his mind because of the COVID-19 crisis and the resulting “massive monetary inflation”. With bitcoin, he says, we see the birth of a new store of value (a means of value storage) that can retain purchasing power better than regular currencies.

After all, central banks aim for an inflation rate of 2% per year for regular currencies, Jones explains. Anyone who owns regular ( fiduciar/fiat ) money therefore actually owns something that is destined to lose value. This is in stark contrast to bitcoin, which has real scarcity and where the maximum amount of bitcoins is invariably set at 21 million bitcoins.

Bitcoin is a “great speculation,” according to Jones. But, he points out, it’s only eleven years old and Bitcoin has yet to prove it can stand the test of time. He therefore only invests a modest percentage of his portfolio. He does expect that the longer bitcoin continues to exist, the greater the confidence in it will become. He also says he wouldn’t be surprised if bitcoin eventually turns out to be his best-performing investment and, in fact, he expects it to be, according to Jones.

peanuts in the case of Paul Tudor Jones and his fund . Tudor Investments manages assets of around EUR 30 billion and Paul Tudor Jones himself is estimated to be worth around EUR 4 billion.

George Ball

Wall Street veteran George Ball, former CEO of Prudential Securities and now CEO of Sanders Morris Harris, has also turned around.

In an interview with Reuters, he said that many stock market investors are probably concerned about the consequences of the economic emergency measures. He expects that many people will significantly adjust their investment portfolios to the changing circumstances.

When asked what would be the best way for people to invest their capital, he replied that he expects many people to seek refuge in bitcoin. After all, the financial emergency support must end at some point, the bill will have to be paid, he explains. According to him, this can be done through tax increases or by printing new money, which can lead to inflation.

Wealthier investors and traders will therefore turn to bitcoin “or something similar,” according to Ball. For the long term as an economic haven, or for speculation in the short term. According to Ball, the upcoming Labor Day on September 7 could be a tipping point.

Ball says he is also a former opponent of bitcoin, but now insinuates he is a ‘total convert’ . He refers to JP Morgan’s Jamie Dimon who used to be a fierce opponent, but who according to Ball is now a ‘partial convert’ .

Gray Scale Bitcoin Trust

Meanwhile, investment fund Grayscale Bitcoin Trust (GBTC) has been buying up huge amounts of bitcoin for some time now. GBTC is a fund in which stock market investors can invest and Grayscale buys bitcoin with the funds raised. In this way, stock market investors can indirectly invest in bitcoin.

And they seem to be doing that en masse. GBTC already managed about 125,000 BTC at the end of 2019, but that rose to 387,000 BTC in the first six months of this year. Since then, interest has not exactly waned, because in the following two months GBTC attracted even more investors and the fund grew from more than 3 billion to more than 4 billion in bitcoin under management. It is estimated that the fund now manages about 2% of the total maximum amount of bitcoin there will ever be.

According to some reports, Grayscale has actually bought more bitcoin during some periods than the total global production capacity of all bitcoin miners. Stock market investors therefore seem interested in bitcoin and increasingly so.

An overview by Forbes shows that the largest investors in the fund are parties such as Ark Invest and Horizon Kinetic. Both have around ??4 to ??5 billion in assets under management and they invested just under 1% of it in GBTC.

Some ‘smaller’ asset managers invested larger percentages. The most daring is Corriente Advisors from Texas, which invested about 1.6% of roughly ??200 million under management in GBTC. Arkadios Wealth Advisors with approximately ??500 million under management invested about 1.45% of it in GBTC.

Other names also appearing on the list of investors include IFP Advisors, Boston Private Wealth, Rothschild Investment Corp, First New York Investment Advisers, Heritage Wealth Advisors and Slatestone Wealth.

George Soros

In slightly older news we find another name that may also belong in this list: George Soros. Shortly after the price of bitcoin collapsed by more than half in 2018, the billionaire allegedly authorized his investment fund Soros Fund Management to trade bitcoin.

That was remarkable because during the World Economic Forum in Davos three months earlier, he called bitcoin another typical bubble. Bitcoin would also be especially interesting for dictators and tax evaders, Soros said at the time.

Whether investments in bitcoin have actually been made from his fund is as yet unknown. A Soros Fund Management representative declined to comment at the time. However, it turned out that Soros had bought shares in Overstock in February 2018. Overstock is a well-known name within the bitcoin community, because the webshop was one of the first larger companies to accept bitcoin payments.

Institutional Investors

Adoption is probably a gradual process with no definite turning point. Yet it seems less and less appropriate to say that institutional investors are coming, when more and more of them already appear to be there.

Opinions are divided on whether this is a good or bad development. The arrival of ?ǣbig money?ǥ has been argued by some to have favorable implications for price and social acceptance, but there are also concerns that it may turn the bitcoin market into a plaything for big business and have implications for decentralization.

Still, adoption by major institutional players is likely inevitable if global adoption is the end goal. And what people think doesn’t really matter either, because the bitcoin network is apolitical, amoral, neutral and open to everyone. So also for institutional investors and big capital. Because of decentralization, nobody can do anything about that; that is the power of Bitcoin.

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