It’s Sunday Aug 13th in London. Today we woke to bitcoin over $4,000 for the first time. This feels like the right moment to reflect on a few things I’ve witnessed on the “front lines” of bitcoin (crypto) finance over the last 6 months and what I am predicting through end of year.
Observation 1: Redefining the “typical bitcoin investor” — Not who you would expect
My team and I track every inquiry we receive, meticulously tagging each type of investor we are speaking to (e.g. high net worths, hedge funds, institutional, family office, etc.). Historically, our inbound inquiries have been 90% high net worth individuals with 10% scattered amongst family offices and money managers. It’s been like this for years. Yet over the past 2.5 months, the high net worth individual category dropped below 65%, and not because volume decreased.
Institutional names, pensions and hedge funds are the reason. We are witnessing a dramatic increase in inbound interest and it isn’t just our group. If you pay attention to the headlines, this has been echoed elsewhere:
- Crypto Boom: 15 New Hedge Funds Want In On 84,000% Returns
- Bitcoin Spikes Over $3800 As Institutional Investor Interest Soars
- Here's What Goldman Is Telling Big Money Clients About Bitcoin
Observation 2: Rapid escalation in level of bitcoin knowledge
Perhaps more interesting is not the inbound emails, or interest, but rather, the depth of knowledge (and enthusiasm) for bitcoin many of these institutional investors are bringing.
I spent the last 3.5 years battling with financial “elite” over the economics, investment thesis and fundamentals of bitcoin. As interest from professional investors increased, I expected this same battle to play out over the telephone lines and conference tables that comprise my day-to-day.
This has not been the case. In fact, quite the opposite.
Rather, to my surprise the majority of these professional investors come to meetings well prepared, knowledgeable about bitcoin and most interestingly, versed in the opportunity and investment thesis for bitcoin.
My “sales meetings” have turned into consultations, mainly about the smartest ways of gaining exposure to bitcoin while minimizing risk, rather than having mental battles about digital decentralized feasibility.
Mind you, 6 months ago I was having to explain why bitcoin exists or worse, what it’s backed by.
Perhaps this new depth and competence is natural and what I should expect with a more qualified professional investor. Or perhaps this means bitcoin is becoming “main stream”. Or both. Either way, as a group, our assets under management have grown to over $200MM; and average ‘ticket sizes’ are growing even faster.
This change doesn’t happen in a vacuum, either.
Observation 3: The media narrative is changing
I remember a time not too long ago when my colleagues (and mom) would send me a nasty Bloomberg or CNBC article. You know what I am talking about — the ones with headlines like: “Bitcoin exchange hack occurs while the dangerous currency struggles to gain momentum”.
Whenever bitcoin was mentioned in the news, you had a misinformed and often, worse –ignorant analyst struggling their way through an interview trying to explain bitcoin — this new digital currency.
Possibly even worse, CNBC would bring on cyrpto experts. Experts in cryptocurrencies yes, experts in the TV presentation skills — NO.
Mainstream finance is not used to listening to cypherpunks and developers appearing in cat t-shirts — I can’t put my finger on it, but the cat t-shirt just doesn’t instill confidence in main-stream investors (no offense to Vitalik Buterin at all, I’m a huge fan).
Today this narrative has changed. Now we have a wave of professional analysts appearing in the mainstream media.
Analysts and professionals like cburniske, Brian Kelly, and Daniel Masters who can explain the proper fundamentals and investment thesis for bitcoin and crypto assets . No doubt, this is part of what is driving the surge of new investors. We don’t go a day, at this point, where bitcoin isn’t featured on at least 1 of the top 10 finance news outlets. And just like with the new investors, the new narrative is more educated, the “experts” are more mainstream and the points, more salient:
Prediction 1: A mainstream adoption of a smaller denomination of Bitcoin
With bitcoin crossing $4,000 it’s not uncommon to hear “I own a whole bitcoin” or “I wish I could own a whole bitcoin”. In the not distant future, I believe it will be incredibly rare for one person to own a full bitcoin. If you need evidence of this — look no further than the fact that there simply will never be enough bitcoins mined for each millionaire in the world to own just 1 bitcoin.
As many of you know, a bitcoin is divisible by 1/10,000,000. Which means we can send fractions of a penny around the world (4/100th of a penny at $4K; pending transaction fees). In my opinion, as the price continues to rise, it makes even more sense for us to start referring to a smaller denomination of bitcoin for commercial purposes and retail consumer psychology.
In any asset class, as adoption and liquidity increase, the finance world ends up defining units and orders of magnitude. Whether by shorthand or for legacy economic reasons — we get handles, pips, points, dollars, cents, etc.
Not to mention the consumer psychology part of the equation — think stock splits.
In bitcoin, I believe a smaller unit will make commercial transactions more friendly and give retail purchasers less anxiety about getting into bitcoin if they can’t afford a ‘whole coin.’
Within a year, we will see exchanges start to use mBTC or 1-thousandth of a bitcoin.