8. März 2021

Bitcoin and the Smart Money: What investors can learn from the pros

Bitcoin and the smart money: here’s what retail investors can learn from the pros

Since the Bitcoin investments of Tesla CEO Elon Musk and Microstrategy CEO Michael Saylor, the mood has heated up. Quite a few small investors are therefore wondering what influence companies like Tesla have on the crypto market, which S&P500 candidate could soon join the Bitcoin investors and how to interpret such news correctly for oneself.

Even though companies like Elon Musk’s Tesla or Twitter founder Jack Dorsey’s Square have a particularly strong social media presence and can attract enormous public attention, most of the money in the Crypto Genius institutional crypto space comes from asset managers and hedge funds. One name in particular is worth mentioning here: Grayscale. The so-called Bitcoin Grayscale Trust holds around three percent of all existing Bitcoin, which currently represents just under 650,000 Bitcoin. Or to put it another way: over 30 billion US dollars.

Among the investors in the gigantic Bitcoin trust are mainly fund or investment companies such as ARK Investment, Kinetics Portfolios or Rothschild Investment Corporation. For many of these clients, constructs such as the Grayscale Bitcoin Trust represent a particularly convenient way to reflect Bitcoin in their portfolios and fund products.

Pros and cons of BTC investments

For large investors, different investment criteria sometimes count than for private investors. Quite a few see BTC as an optimal portfolio addition, so that even the investment bank J.P. Morgan recommends a Bitcoin addition. We have therefore compiled a list of the pro and con arguments for a Bitcoin investment and listed them in the Kryptokompass magazine.

Even more important, however, than other big players with Bitcoin affinity, are the big players on Wall Street, which provide unprecedented access to the crypto market. Accordingly, we also outline how asset managers and hedge funds are redefining the rules of the game and changing the market.

Smart Money: What comes after Bitcoin?

As most private investors know from their own crypto portfolio, BTC is rarely the only digital asset. Accordingly, other cryptocurrencies are also likely to benefit from the rising institutional interest. For this to be the case, however, certain hurdles must be overcome. Once these are overcome, however, large inflows of funds can ensure sharply rising prices. Accordingly, we have considered how high the opportunities are for other crypto investments outside of BTC.

The impact of institutional investors tapping into exchange-traded index funds, for example, is something we have already seen in the past with gold. When the first gold ETFs were issued in 2003, the price of gold rose in parallel with investor interest. Hundreds of billions of US dollars are now tied up in these gold securitisations. With increasing institutional interest, such products could also lift the bitcoin price into new spheres. Accordingly, private investors would be well advised to keep a close eye on what the big investors on Wall Street are doing.