“Normally in times of crisis people run to cash but who in their right mind wants to be cash-rich at a time when major economies are devaluing their currencies?” says Kevin Murcko, the founder and CEO of CoinMetro, a cryptocurrency exchange based in Estonia. “You could say that Covid-19, the U.S. election, Brexit, and, well, the entirety of 2020 have altered the way many in traditional finance view the value of digital assets.”
How long that may last is unknown. But analysts at JPMorgan Chase & Co. say investors have been withdrawing cash from gold funds at the same time Bitcoin is winning over more institutions. The Grayscale Bitcoin Trust, a listed security popular with money managers, has seen inflows of almost $2 billion since October compared with outflows of $7 billion for exchange-traded funds backed by bullion, according to a JPMorgan report this week.
The analysts’ calculations suggest Bitcoin only accounts for 0.18% of family office assets, compared with 3.3% for gold ETFs. Tilting the needle from bullion to the cryptocurrency would represent the transfer of billions in cash.
“The adoption of Bitcoin by institutional investors has only begun,” wrote the analyst team led by Nikolaos Panigirtzoglou.
Tania Modic, a wealthy investor based in Lake Tahoe, Nevada, says she’s bought Bitcoin for years, partly as a “convenient store of value” free of the hassle and expense of handling and storing physical gold. Yet Modic says don’t discount the psychological and cultural forces driving the wealthy to warm up to crypto.
First, there’s FOMO, which is running high in the affluent circles she moves in. Then there’s all the young people who are scooping up crypto on Robinhood and other trading apps. Bitcoin trading on eToro, a platform that’s popular with amateur investors in Europe and Asia, is running close to the boom in late 2017, according to the firm. Additionally, the number of women going into Bitcoin on the site has doubled compared with the last bull run.
“The big boys are putting their funds into Bitcoin as a hedge against being called Neanderthals who missed the crypto boat,” says Modic, the managing member of Western Investments Capital LLC, her investment family office. “And let’s not forget that they all have millennial kids or grandkids rooting them on.”
This article was provided by Bloomberg News.