December brought crypto investors a truly festive mood. While at the beginning of the month bitcoin fluctuated between $18,800 and $19,700, in the last week it not only overcame the psychologically important mark of $20,00, but for the first time in history it exceeded the level of $23,500. What (or who) led to this rise?
Several large companies and funds have recently announced investments in bitcoin. Back in August, analytics software provider MicroStrategy Inc. said it bought 21,454 BTC (about $250 million) at the time. In September, the company ramped up its bitcoin investments and bought an additional 16,796 BTC for $175 million.
MicroStrategy later announced plans to float $400 million in convertible senior notes in order to buy more cryptocurrencies. That said, it was later revealed that the company had managed to raise more – $650 million.
In early December, the U.S. insurance company MassMutual, which manages $235 billion in assets, announced that it had invested $100 million in bitcoin. The main reason for investing in bitcoin was the decline in the dollar.
Just the other day it became known about the interest in cryptocurrencies from two other major players. Thus, British investment company Ruffer Investment Company, which has about $27 billion under its management, placed 2.5% of its assets in bitcoin. The company explained its move this way:
„We see this as a small but effective hedge against the continued depreciation of the world’s major currencies. Bitcoin diversifies the company’s (much larger) investments in gold and inflation-linked bonds and acts as a hedge against certain currency and market risks that we see.“
There is no exact data on the size of the assets of the Ruffer Multi-Strategies fund through which the investment was made, but various estimates suggest that the amount invested could range from $1.86 million to $37.5 million. Looking at all of the company’s assets, however, it is closer to $675 million.
Ruffer also said it cut its gold investments to be able to include bitcoin in its portfolio. She said she was guided by two requirements in making the decision: not to lose money over the next 12 months and to build up the value of client assets over the long term by outperforming deposit accounts.
In addition, hedge fund One River Asset Management partnered with Brevan Howard Asset Management co-founder, billionaire Alan Howard to acquire more than $600 million worth of cryptocurrency. The One River Digital Asset Management fund, launched in October specifically to invest in cryptocurrencies, plans to grow its bitcoin and ether assets to $1 billion by early 2021.
The company bought crypto engine in November without attracting widespread attention so as not to provoke a sharp rise in bitcoin. The coins were bought at less than $16,000 per bitcoin. The head of One River Asset Management, Eric Peter, stressed that the cryptocurrency market has more risks than gold, but it also offers higher profits. FxPro’s team of analysts notes:
„Everyone involved understands that there could be quite a few of these funds.“
According to JPMorgan Bank strategist Nikolaos Panigirtzoglu, demand for cryptocurrencies is growing from family wealth management firms, insurance companies, pension funds and other investors with large assets. The latter two categories are unlikely to take significant positions, but even a small movement of their capital into the cryptocurrency market will prove tangible, Panigirtsoglu says:
„MassMutual’s purchase of bitcoin represents another achievement in the spread of cryptocurrency among institutional investors. You can see the potential demand that could emerge over the next few years, while other insurance firms and pension funds follow MassMutual’s lead.“
He estimates that putting 1% of the assets of insurance companies and pension funds from the U.S., eurozone, U.K. and Japan into bitcoin would bring in an additional $600 billion.
At the same time, the JPMorgan expert acknowledges that difficulties with the levels of risk and liability limit the ability of traditional investors, including insurers and pension portfolio managers, to invest in bitcoin.