Amid a pandemic that’s seen the U.S. dollar tank in value, the price of bitcoin has exploded nearly 150% this year and 15% in the past week alone, sparking a wave of renewed attention from Wall Street as the pioneering cryptocurrency nears its all-time price peak from late 2017 (before the crypto market infamously crashed).
At a New York Times conference on Wednesday, JPMorgan Chase’s billionaire chairman and CEO Jamie Dimon, who in 2017 regrettably called bitcoin a fraud, said he’s a “believer” in blockchain technology (JPMorgan has its own cryptocurrency) and “properly backed, properly regulated” cryptocurrency, but that bitcoin isn’t his “cup of tea” and too many questions remain around its regulation.
But Bitcoin’s resurgent price prompted billionaire hedge fund manager Ray Dalio to question his own skepticism on Tuesday: “I might be missing something about Bitcoin so I’d love to be corrected,” Dalio tweeted before launching into a slew of perceived downfalls, echoing much of the bearish sentiment on Wall Street.
As a medium of exchange, bitcoin still isn’t widely accepted by merchants, which Dalio postulates is because of its volatility–something that also makes it “not very good as a store-hold of wealth,” he added.
“Bitcoin has made me an honest man in 2020,” DoubleLine Capital CEO Jeffrey Gundlach said at Forbes’ Wealth Management Summit last week touting his January prediction that prices would eclipse $15,000 this year; in October he’d noted that bitcoin was ‘a lie‘.
He also said bitcoin has been soaring in tandem with gold, a sign investors are flocking to the cryptocurrency as a hedge against inflation.
The CEO of $12 billion wealth advisory deVere Group, Nigel Green, agreed with that in a note on Wednesday, saying inflation fears spurred by massive government spending during the pandemic have investors “piling into safe-haven assets, in particular those not tied to any specific country, such as Bitcoin and gold, as a shield against the turbulence.”
Many investors are now taking to bitcoin as a “legitimate hedge against longer-term inflation concerns, which have come to the fore due to stimulus packages,” Green further noted on Wednesday. “These emergency measures, like the massive money-printing agenda, reduce the value of traditional currencies like the dollar, and other inherent characteristics of cryptocurrencies are piquing interest too,” he added, pointing to trends like increased global trade, digitalization and younger consumers who are more likely to embrace cryptocurrency.
DeVere Group said on Wednesday that 73% of more than 700 of its millionaire clients who responded to the firm’s annual cryptocurrency survey said they are already invested in or will invest in cryptocurrencies by 2023, up from 68% last year as high net worth individuals rebalance their portfolios toward crypto, Green said.
“Unlike gold, which is the third highest reserve assets that central banks own, I can’t imagine central banks, big institutional investors, businesses or multinational companies using [bitcoin],” Dalio tweeted on Tuesday, but past volatility–and the lack of day-to-day transferability–hasn’t stopped a cadre of institutional investors and corporations from at least warming up to bitcoin this year. Through the first half of 2020, more than 20 financial institutions, ranging in assets from $10 million to more than $5 billion, revealed they owned bitcoin via the Grayscale Bitcoin Trust, a publicly traded investment vehicle that owns bitcoin and loosely tracks its price. In October, payments company Square invested $50 million in bitcoin in order to diversify its largely USD-denominated balance sheet, becoming the latest large institution plowing big money into the world’s first cryptocurrency.
What To Watch For
Regulation. “My experience with the government is they can regulate whatever they want, when they feel like it… and if [bitcoin] gets bigger and bigger, it will be regulated,” Dimon said on Wednesday. “Around the world, it’s already starting to happen,” he added, likely referencing enhanced regulation in countries like South Korea, India and China, which bars financial institutions from facilitating cryptocurrency transactions. The SEC, meanwhile, has largely cracked down on crypto-fundraising through “initial coin offerings,” but it’s been hesitant to issue guidance on the industry as a whole–though that could soon change. “There is more and more interest from a wide spectrum of people, both inside the crypto space as well as inside the traditional financial institutions who are asking us for guidance,” an SEC Commissioner told CoinDesk last month. “I think we’re going to be forced to confront that more and more in the coming years.”
$19,783. That’s the price bitcoin peaked at in late 2017 after climbing 15-fold that year amid a flood of heightened attention and surging mainstream adoption, as retail trading became easier through pioneering bitcoin platforms like brokerage Coinbase. But that bubble proved unsustainable, and bitcoin’s price crashed 80% by the end of 2018. Bitcoin’s rise this year has boosted prices to about 90% of peak levels.