Monday 22 March 2021 11:59 am

Bitcoin’s $1 trillion market cap ‘too important to ignore’ as retail investments grow

CryptoCompare data shows the price of Bitcoin (BTC) dropped from a $61,800 all-time high to a $54,000 low this week before recovering and retesting the $60,000 mark on numerous occasions. BTC is currently trading around $58,000.

Ether (ETH), the second-largest cryptocurrency by market capitalisation, moved within a tight range between $1,850 and $1,750 throughout the week. It’s currently trading at $1,800. Its all-time high above $2,000 was hit last month.

This week a report by Deutsche Bank made headlines throughout the cryptocurrency world as it said Bitcoin is now “too important to ignore” given its $1 trillion market capitalisation. The report suggested BTC’s price could keep on rising as long as it kept on attracting asset managers and companies.

Its volatility is expected to remain unchanged, given its limited tradability. Deutsche Bank compared Bitcoin to Apple stock, pointing out 28 million BTC were traded last year – equivalent to 150% of its supply – while 40 billion APPL shares were traded over the same period – equivalent to 270% of their supply.

Bitcoin, it adds, must transform its potential into results, the same way electric car marker Tesla has done. Its current valuation reflects a shift toward cross-border digital currencies, and BTC needs to demonstrate its value.

Analysis conducted by JPMorgan strategists led by Nikolas Panigirtzoglou has, however, found that retail investment in Bitcoin is growing, while the amount being bought by institutional investors has slowly been decreasing.

Retail investors

The analysis found retail investors bought 187,000 BTC this quarter, while institutions bought 173,000 coins. Last quarter, retail investors bought 205,000 BTC, compared to the 307,000 bought by institutional investors.

Retail investors may keep on adding BTC to their portfolios throughout the month, as a survey conducted by Mizuho Securities found that $40 billion of the $380 billion being distributed to Americans in direct stimulus checks could be used to buy Bitcoin and stocks.

After surveying approximately 235 individuals with household incomes below $150,000 a year, Mizuho managing director Dan Dolev and his team found that two in five recipients of the third stimulus check expect to use at least a portion of it to invest.

Institutions aren’t necessarily selling their BTC holdings at this point. According to Robby Gutmann, the CEO of Bitcoin investment firm NYDIG, over the next week announcements from some of the firm’s strategic partners may change the traditional financial landscape.

Investors may be on the sidelines waiting for cryptocurrency exchange Coinbase to start trading on the Nasdaq. Its public debut was scheduled for this month but was recently delayed until April.  In private transactions, Coinbase shares have been traded between $200 and $375, with the volume-weighted average price per share for transactions being $343.5.

Popular cryptocurrency trading platform Kraken has this week also revealed it is considering a stock market debut next year. Fox Business reporter Charles Gasparino has said its executives are mulling either a tie-up with a special purpose acquisition company (SPAC), or an initial public offering (IPO).

Morgan Stanley to offer wealth management clients access to Bitcoin funds

Gaining exposure to cryptocurrencies has been getting easier over time. This week Morgan Stanley reportedly told financial advisors in an internal memo it’s launching access to three funds that let investors gain exposure to cryptocurrencies.

The move will make it the first major US bank to offer its wealth management clients access to Bitcoin funds. Morgan Stanley clients with at least $2 million in assets and “an aggressive risk tolerance” will be able to invest in the funds. Investments firms will need at least $5 million at the bank to qualify for the Bitcoin funds.

Both investment firms and clients will need to have accounts with at least six months at the bank. Even then, their BTC investments are limited to 2.5% of their total net worth. Two of the funds, the Galaxy Bitcoin Fund LP and FS NYDIG Select Fund, have a minimum investment of $25,000, while the Galaxy Institutional Bitcoin Fund LP has a $5 million minimum.

Moreover, digital asset manager Grayscale launched five new trusts allowing investors to gain exposure to the Basic Attention Token (BAT), Chainlink (LINK), Filecoin (FIL), Decentraland (MANA), and Livepeer (LPT).

Over the week Hong Kong-listed tech firm Meitu announced it bought an additional 16,000 ETH at an aggregate price of $28.4 million, and 386.085 BTC at an aggregate price of $216 million. The firm had bought $22.1 million of ETH and $17.9 million of BTC earlier this month.

Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies but has no bias in his writing.

Featured image via Unsplash.