About three years ago, Morgan Stanley analyst James Faucette and his team sent a note to its clients about Bitcoin. In the paper, the group suggested that the actual value of the benchmark cryptocurrency, which was trading around $13,500 at that time, might be zero.
Mr. Faucette might have been right to a point. The year 2017 was a ruckus in the name of an emerging cryptocurrency market. Many startups emerged to replicate Bitcoin’s core working model through their repackaged “blockchain innovations.” They sold native tokens to generate operational funds—all in exchange for Bitcoin and its true contender Ethereum.
More than 90 percent of those startups failed to deliver an actual product or simply vanished into thin air, taking their investors’ Bitcoin and Ethereum tokens with them. Later, they mass-dumped them onto the market, crashing BTC/USD by more than 80 percent and ETH/USD by 85 percent.
Meanwhile, the startup’s own native tokens became worthless. If 2017 was a ruckus, 2018 was a bloodbath.
Rebirth of the Crypto Era
Many financial analysts, strategists, and economists have refused to come out of the 2018 crypto bubble burst. Some, including Nouriel Roubini and Peter Schiff, still look at Bitcoin with skepticism, reinstating over and over again that its true value is zero, especially as its price rises from $3,858 in March last year to over $51,000 at press time.
That is despite the cryptocurrency’s growth trajectory as a standalone project. From being called a “bubble,” “the mother and father of all scams,” and “rat poison squared,” to being called “a new asset class” only recently, Bitcoin is now a 12-year old success story if one focuses on its price growth, adoption, and scalability.
And even skeptics are turning their anti-Bitcoin tones down.
The same Morgan Stanley whose analysts kept its clients from investing in Bitcoin is flirting with the idea of investing in the cryptocurrency. Recent media reports indicate that the bank’s $150 billion investment arm, dubbed as Counterpoint Global, may end up becoming a Bitcoin HODLer.
The change did not happen overnight. It took mainstream institutions a pandemic and a sequence of aggressively dovish policies to realize that their cash reserves/allocations are absolutely bearish in the long run.
They see that how central bankers in the last decade repealed price discovery in markets with ultralow interest rates and quantitative easing.
For investors, it is now very difficult to tell between a healthy company or a debt-ridden business. They are forced to take riskier positions in the market because they know they won’t be able to make the best out of their cash reserves due to meager bond yields and an abundant US dollar supply. In short, there are no alternatives.
Then, one day, after teasing its audience for a while, Elon Musk and his carmaker giant Tesla reveals that it has exchanged about 8-10 percent of its dollar reserves for a new asset called Bitcoin. The company further signals that it may add more of the cryptocurrency units to its balance sheet, even if it means selling their expensive cars using it as a mode of payment.
That marks one of the most high-profile investments made into the Bitcoin space. The cryptocurrency’s market reacts with a boom and the price spikes to over $50,0000 per token, a twofold jump in just three months.
A $100,000 Bitcoin Underway?
The 2017-18 crypto bubble is entirely a different animal to Bitcoin’s current price boom. The cryptocurrency is emerging as an asset class—a hedge against global economies under heavy debt-burdens.
With companies like Tesla, MicroStrategy, and Square adding Bitcoin to their balance sheets, other corporates are showing interest as well. That includes Twitter and Uber that lately opened up to the idea of integrating Bitcoin into their services should their employees/customers/vendors start to demand it as payment.
“Now you got the biggest, the wealthiest man in the world and one of the biggest stories doing it,” said Mike Novogratz, the founder of Galaxy Digital. “You’ve got to think other CFOs and CEOs are saying, what should we be doing?”
The billionaire investor added that Bitcoin would easily surpass the $100,000 valuation should the corporate adoption pick momentum.
Anthony Scaramucci, the founder of $9.2 billion fund-of-funds SkyBridge Capital, also thinks on the same line. He told money managers:
“You’re going to be benchmarked off of Bitcoin, meaning in your mosaic of stocks and bonds and alternatives and gold, there’ll be a few percentage points related to digital currency. And since Bitcoin is the winner of that battle, it’ll likely be Bitcoin. So if you’re not going to be an investor in Bitcoin you’re effectively short Bitcoin.”
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