Category Archives: Bitcoin
Waste from one bitcoin transaction like binning two iPhones – The Guardian
A single bitcoin transaction generates the same amount of electronic waste as throwing two iPhones in the bin, according to a new analysis by economists from the Dutch central bank and MIT.
While the carbon footprint of bitcoin is well studied, less attention has been paid to the vast churn in computer hardware that the cryptocurrency incentivises. Specialised computer chips called ASICs are sold with no other purpose than to run the algorithms that secure the bitcoin network, a process called mining that rewards those who partake with bitcoin payouts. But because only the newest chips are power-efficient enough to mine profitably, effective miners need to constantly replace their ASICs with newer, more powerful ones.
The lifespan of bitcoin mining devices remains limited to just 1.29 years, write the researchers Alex de Vries and Christian Stoll in the paper, Bitcoins growing e-waste problem, published in the journal Resources, Conservation and Recycling.
As a result, we estimate that the whole bitcoin network currently cycles through 30.7 metric kilotons of equipment per year. This number is comparable to the amount of small IT and telecommunication equipment waste produced by a country like the Netherlands.
In 2020 the bitcoin network processed 112.5m transactions (compared with 539bn processed by traditional payment service providers in 2019), according to the economists, meaning that each individual transaction equates to at least 272g of e-waste. Thats the weight of two iPhone 12 minis.
The reason why e-waste is such a problem for the cryptocurrency is that, unlike most computing hardware, ASICs have no alternative use beyond bitcoin mining, and if they cannot be used to mine bitcoin profitably, they have no future purpose at all. It is theoretically possible for these devices to regain the ability to operate profitably at a later point in time should bitcoin prices suddenly increase and drive up mining income, the authors note.
Nonetheless, there are several factors that generally prevent substantial extension of the lifetime of mining devices, they add. Storing mining hardware costs money, and the longer it is stored for, the less likely it is that it will ever be profitable.
The authors also warn that the e-waste problem will probably grow further if the price of bitcoin continues to rise, since it will incentivise further investment in and replacement of ASIC hardware.
If the community were to try to reduce its e-waste problem, the paper concludes, it would need to replace the bitcoin mining process in its entirety with a more sustainable alternative, and the paper suggests proof of stake, an experimental replacement. Ethereum, a bitcoin successor, announced in May plans to move to proof of stake within months, although the switchover has yet to occur.
Other bitcoin alternatives have been less successful at limiting their environmental footprint. Chia, a cryptocurrency that is built on a proof of time and space algorithm, has been accused of leading to shortages in hard drives and SSDs, a type of storage medium popular in fast computers. Instead of just wasting electricity, Chia chews through SSDs at a fantastic rate and also has thoroughly wrecked the market for big HDs, said David Gerard, a cryptocurrency expert.
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Waste from one bitcoin transaction like binning two iPhones - The Guardian
Why The Bitcoin Price Is Staying Above $40,000 – Bitcoin Magazine
The below is from a recent edition of the Deep Dive, Bitcoin Magazine's premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.
The $40,000-plus range has been a key psychological level for the bitcoin price. Since the start of 2020, the bitcoin price has existed at or above $40,000 for 155 days, or 36% of the time. Since all of those 155 days happened in 2021, the price has existed at or above $40,000 on 59% of the days of this year. To dig in further, we can use the UTXO realized price distribution data to get some better context on Monday's price decline and how the $43,460 closing price fits within the bigger picture.
Currently, 21.8% of supply is at or above the closing price level, showing a significant amount of interest for bitcoin changing hands at a higher range. On the other side, 19.4% of supply is above $20,000 and below the closing price with strong support built up in the $31,000 to $43,000 range. Roughly 25% of bitcoin supply exists above $40,000.
Each bar in the charts shows the amount of existing bitcoin that last moved within that price range. For bitcoin to drop below $40,000, we would have to see a significant sell-off in the market with many short-term investors realizing losses alongside a bigger structural change to long-term holders that accumulated in that 19.4% supply middle range.
Source: Glassnode
Source: Glassnode
Source: Coinmetrics
Another way to view potential losses in the market is through the percentage of bitcoin supply in profit. Over the last few weeks, the percentage supply in profit has dropped 13% with most of that decline happening last night. We saw much lower levels at 66% back in July this year right before the 70% price increase from $29,000.
Source: Glassnode
If we do see a further bitcoin price move to the downside in the short term, there looks to be plenty of room for long-term holders in the market to absorb it. This week, we're keeping a close watch on derivatives market dynamics and macroeconomic conditions.
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Why The Bitcoin Price Is Staying Above $40,000 - Bitcoin Magazine
Crypto hedge fund launches actively managed ether and bitcoin trusts – The Block Crypto
A crypto investment firm is launching two new products that aim to offer accredited investors the opportunity to add crypto exposure with less of the market's breakneck volatility.
Cambrian Asset Management, a California-based investment firm with more than $200 million in assets under its management, announced this week its so-called Cambrian Bitcoin Systematic Trust and Cambrian Ethereum Systematic Trust products. Unlike existing products, like Grayscale's Bitcoin Trust, Cambrian's new funds plan to manage down risk in bitcoin and ether's price in addition to offer exposure.
We are excited to offer a new way of investing in digital assets through the launch of these newTrusts, said Martin Green, Co-CIO and CEO of Cambrian. Investors have asked us many times ifthey can use our systems to actively manage their Bitcoin or Ethereum exposure to protectagainst the material drawdowns that are endemic to digital assets markets."
Green's Cambrian has been leveraging so-called quantitative trading strategies and more than 100 billion market data points to return an outsized return to investors. As reported by Bloomberg, the fund returned 76% for its investors from the beginning of 2021 through the end of August. Bitcoin, meanwhile, has returned 62%. At the same time, the fund has suppressed "downside volatility by greater than 70%," a press release notes.
That could be a welcomed feature for investors looking for exposure to a market that frequently sees cascading liquidations trigger more than 50% drawdowns.
In an interview with The Block, Green said the two new trust products could serve as a foundation for further products, which could offer accredited investors exposure to a wide range of assets. Potentially, Cambrian could open those products to retail investors with the proper regulatory approvals and corporate partnerships.
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Crypto hedge fund launches actively managed ether and bitcoin trusts - The Block Crypto
$2 Billion Worth of Unpeeled Casascius Physical Bitcoins: There’s Less Than 20000 Coins Left Active Featured Bitcoin News – Bitcoin News
While bitcoin continues to become more scarce every day, the most popular set of physical bitcoins, crafted by Mike Caldwell from 2011 to 2013, have become far scarcer than their digital counterparts. As of September 18, 2021, there are now less than 20,000 active bitcoins from the Casascius physical bitcoin collection.
Bitcoin has become a well-known technology and in the early years a number of people and companies deployed concepts called physical bitcoins. Essentially, a group or individual would fabricate a coin with the bitcoin symbol etched on it and the coin would also hold digital BTC hidden within the coins body.
Its safe to say that the Casascius physical bitcoin collection created by Mike Caldwell is the most popular collection to date, and these rare physical bitcoins are sold for much more than the face value of the digital bitcoin they hold.
Casascius bitcoins sport a holographic tamper-resistant sticker on one side of the coin, and if the sticker is peeled, the digital bitcoins private key is revealed. Caldwell crafted both coins and bars that held loaded bitcoin (BTC) and created series 1 (1-1,000 BTC), series 2 (0.5-500 BTC + the DIY Storage Bars), and series 3 (0.5-1 BTC).
Unfortunately, the U.S. government forced Caldwell to stop minting Casascius bitcoins with loaded BTC on them. By the end of Caldwells tenure making these coins, he managed to mint around 27,920 Casascius bitcoins with various increments of loaded BTC. Over the years owners have redeemed the loaded value held on these Casascius bitcoins in a process called a peel.
On December 23, 2019, Bitcoin.com News reported on a 100 BTC gold bar that was peeled or redeemed. This means the digital BTC value was spent by the owner and the physical bar is empty with zero digital value left. Ten years after the first Casascius bitcoins were minted, theres under 20K left that are active with loaded BTC.
According to statistics from casasciustracker.com, on September 18, 2021, theres approximately 19.92K active Casascius bitcoins waiting to be peeled. So far 8,009 coins or bars have been redeemed over the last ten years and theres approximately 43K BTC left unpeeled worth over $2 billion.
48,169 BTC worth $2.3 billion has been spent by the peel process. Furthermore, there are some lucky owners who still have yet to peel 1,000 BTC bars or coins worth $48 million using todays exchange rates. For instance, out of the six 1,000 BTC Series 1 Casascius bitcoins, only 2 have been redeemed so far.
In that same series, Caldwell minted 16 1,000 BTC bars and so far 87.50% or 14 bars have been redeemed. There were 81 Series 2 100 BTC coins (worth $4.8M each) minted by Caldwell and to date 47 coins or 58.02% of the BTC has been redeemed from that minted set.
Today, the Casascius physical bitcoin collection has gathered significant numismatic value and the coins and bars are considered coveted bitcoiner collectibles. Even peeled Casascius bitcoins still hold value and some of them are being sold for $1,999 (for a 2012 piece). A loaded silver Casascius physical bitcoin with 0.1 BTC ($4,834) from 2013 is selling for $20,000 today. A rare unloaded set of 125 Casascius physical bitcoins made of aluminum is selling for $4,995.
What do you think about the fact that there are now less than 20,000 Casascius bitcoins left active today? Let us know what you think about this subject in the comments section below.
Image Credits: Shutterstock, Pixabay, Wiki Commons, casasciustracker.com
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
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$2 Billion Worth of Unpeeled Casascius Physical Bitcoins: There's Less Than 20000 Coins Left Active Featured Bitcoin News - Bitcoin News
Evergrande Sell Off And Bitcoin – Bitcoin Magazine
The below is from a recent edition of the Deep Dive, Bitcoin Magazine's premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.
After covering the Evergrande Real Estate Group last week in Daily Dive #060, our biggest concerns were with increased contagion spread to the Chinese economy and global markets. Since then, weve seen a tidal wave of Chinese market sell-offs in the real estate sector, a rise in China bond yields and a larger S&P 500 correction unfolding at the same time. China junk bond yields continue to climb past their March 2020 highs at 14% plus, while the Hang Seng Index fell an additional 8.35% since September 7.
Evergrande Spillover, Source: Bloomberg
Hong Kong Hang Seng Index, Source: TradingView
So far, the largest contagion spread impacts show up in Chinas over-leveraged real estate sector with equity and bond sell-offs happening amongst other top property developers like Country Garden Holdings and Sunac China Holdings. The next level of contagion spread would show up in the Chinese banking sector amidst a liquidity crunch. On Friday, The Peoples Bank of China injected 90 billion yuan ($14 billion) of funds, the most since February, to provide short-term liquidity into the banking system.
Developing Contagion, Source:Bloomberg
Liquidity Jitters,Source: Bloomberg
Shares of Sinic Holdings Group Company, a Shanghai-based real estate developer, plunged nearly 90% on massive volumes (approximately 14 times above average trading volume) before trading was halted. In an article published by Bloomberg, Philip Tse, director and head of Hong Kong and China property research at Bocom International Holdings Co Ltd. said the following,
Its the same story as everywhere else investors are concerned about the liquidity. I think there are most likely some margin calls on some of the major shareholders, by looking at Sinics stock price pattern this afternoon.
Sinic Holding Shares Tank,Source: TradingView
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Evergrande Sell Off And Bitcoin - Bitcoin Magazine
Ark Invest to split ‘60% Bitcoin, 40% Ether’ as confidence in ETH grows ‘dramatically’ – Cointelegraph
Cathie Wood, the CEO of Ark Investment, has doubled down on her prediction that the price of Bitcoin will grow by tenfold in the next five years, and said the growth of DeFi, NFTs and the Eth2 upgrade has massively increased Arks confidence in Ethers future.
Woods prediction would value Bitcoin at almost $500,000 by 2026. She said that Ark Investments future exposure to crypto was likely to be around 60% Bitcoin and 40% Ethereum.
Wood made the comments Monday, during a live stream at the SALT Conference in New York.
Her BTC price thesis is based on more companies adding Bitcoin to their balance sheets and institutional investors allocating around 5% of their portfolios towards Bitcoin or other cryptos.
In her view, Bitcoin still remains the default currency of the crypto space with El Salvador deeming it legal tender and other countries of Central America signalling they may follow soon.
But she said Ethereum is becoming more and more attractive as an investment thanks to the explosion in developer activity related to NFTs and DeFi.
I'm fascinated with what's going on in DeFi, which is collapsing the cost of the infrastructure for financial services in a way that I know that the traditional financial industry does not appreciate right now," she said.
Ark Investment manages several actively exchange-traded funds with a focus on disruptive innovation. It has significant investments in Coinbase and shares in the Grayscale Bitcoin Trust, Wood has spoken frequently about her enthusiasm for Bitcoin.
Related: Bitcoin bull run sparks $180K BTC price prediction ahead of institutional fireworks
Wood said that from past experience she believed no regulator, including new SEC chair Gary Gensler, would want to be blamed for preventing the next big tech breakthrough.
Wood believes the SECs threats to pursue legal action against Coinbase regarding the launch of a stablecoin yield product highlights that the crypto ecosystem is developing faster than the regulators have been able keep up with.
In her view, Coinbase shouldnt be especially worried. Wood highlighted how in October 2019 Canada's largest Bitcoin and digital asset fund manager received a favorable ruling from the Ontario Securities Commission (OSC) to offer a publicly-traded Bitcoin fund.
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Ark Invest to split '60% Bitcoin, 40% Ether' as confidence in ETH grows 'dramatically' - Cointelegraph
Remittances to El Salvador are cheaper without using bitcoin – Quartz
El Salvador president Nayib Bukele says the country will save $400 million a year in remittance fees by adopting bitcoin. That claim doesnt necessarily stack up.
A quick recap: The Central American country rolled out its bitcoin wallet app, called Chivo, on Sept. 7. Businesses are now obliged to accept the crypto token and the US greenback, which was already a national currency, for payments. Bukele seeded the wallets using taxpayer money with $30 worth of bitcoin to get things rolling. The president ishoping to attract a new generation of crypto entrepreneurs and to cut the expense of remittances, which are estimated to make up around 20% of gross domestic product.
Unfortunately for Salvadorans, there may not be a cost or time savings for remittances using bitcoin versus PayPal (via its Xoom offering) or Western Union, according to Jason Mikula, a fintech consultant. Mikula crunched the numbers for sending $200 from the US to El Salvador; his analysis assumes the sender is starting out in US dollars and traded them for bitcoin using Coinbase, the largest US crypto exchange. (He notes that some crypto proponents assume the transaction starts out in bitcoin, which he suggests is unreasonable as most people hold their funds in fiat currencies.)
Exchanging $200 for bitcoin costs between $2.99 to $7.67 at Coinbase, depending on whether the transaction is funded using PayPal, ACH, or debit, Mikula says. The exchange may charge an additional spread for the transaction (the gap between the bid and offer prices for bitcoin on its exchange). Theres also a network fee (paid to the crypto miners who process transactions on a blockchain) to send bitcoin from Coinbase to a Chivo wallet in El Salvador, which runs around $3. El Salvadors bitcoin wallet lets users switch between the US currency and bitcoin at no cost.
By contrast, a person can send $200 from the US to El Salvador using Western Unions mobile wallet, called Tigo, at no cost and in minutes, according to the companys website. Mikula speculates that Western Union may be willing to eat the transaction costs (debit/credit interchange) because fewer remittances are sent this way. Western Union charges a hefty fee for transactions using physical cash: it costs $9 to $18 to send $200 in cash from the US to El Salvador. This is probably a popular way of sending money, as around 70% of the people there dont have a bank account.
Bukele is correct about at least one thing: Remittances are a critical lifeline for millions of people in El Salvador. Around 18% of households receive them, taking in an average of about $195 per month, according to a report from researchers at the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise. They found that remittance costs there absorb about 2.95% of transactions, the lowest level of any nation in the Latin American-Caribbean region.
And they, too, found that sending remittances using bitcoins blockchain rails is more expensive than the systems already in place. Their analysis is partly based on the assumption that people in El Salvador want paper greenbacks, not bitcoin, and will have to pay up a crypto ATM to withdraw the hard currency. (They note that the coastal town of El Zonte, El Salvador, made bitcoin a local currency in 2019, but it didnt catch on.) At present, traditional transfer methods are the cheapest way to make remittance payments, they wrote.
Bukeles controversial bitcoin gamble has a number of serious risks for El Salvador, including the potential to undermine financial stability. That said, there could be some upside if the Chivo wallet succeeds in making digital payments and mobile wallets into the hands of the countrys vast majority that is unbanked. That infrastructure actually could reduce remittance costswithout using bitcoin.
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Remittances to El Salvador are cheaper without using bitcoin - Quartz
It’s possible to invest in cryptocurrency in an IRA, but experts warn against it – CNBC
Over the past year, interest in cryptocurrency has become much more mainstream, with the price of bitcoin, the largest by market value, surging to a record high in April.
With all of the hype, you might be wondering if it's possible and worthwhile to invest in cryptocurrency for retirement, specifically in your individual retirement account, or IRA.
It is possible through a self-directed IRA, which can be used to hold alternative investments normally not permitted in a traditional IRA, such as real estate or commodities. However, experts generally warn against it.
Here's why you should probably avoid investing in cryptocurrency for retirement.
One reason experts warn against investing in cryptocurrency through a self-directed IRA is because they're not widely available and don't make sense for most investors. Generally, they can be both risky and expensive to maintain, even without cryptocurrency holdings.
There are also strict rules in place from the Internal Revenue Service regarding which investments are prohibited in IRAs. With a self-directed IRA, you manage all the investments yourself, so you're personally on the hook if any rules are broken.
"Self-directed IRAs usually require a specialized firm or custodian and the costs can be sizable due to the additional compliance and IRA requirements," Anjali Jariwala, certified financial planner, certified public accountant and founder ofFit Advisors,tellsCNBC Make It."[I]f you fail to abide by all of the rules, then your account may lose its tax-deferred status."
There's also the potential for fraud, as the Securities and Exchange Commission, or SEC, has previously warned. "While a broader set of investment options may have appeal, investors should be mindful that investments in self-directed IRAs raise risks, including fraudulent schemes, high fees and volatile performance," the SEC wrote in 2018.
"I would be really concerned with someone's decision to proceed," Jariwala says.
In addition to the risks of a self-directed IRA, Jariwala warns against investing retirement money in cryptocurrency specifically, due to its volatile and speculative nature.
Cryptocurrency investors generally need to be comfortable with extreme price swings and potentially losing their entire investment. For that reason, crypto may not be the best option in a retirement portfolio. It may make more sense as a relatively small portion of your overall portfolio since it can dramatically increase your portfolio's risk profile and potential drawdowns.
"I believe in diversification and prefer IRA-type accounts to be invested in the markets," Jariwala says. "If [an investor has] extra money that is in cash or sitting in a brokerage account, that may be used toward more speculative investments like bitcoin, but I wouldn't try to find a way to invest retirement money."
It's also important to consider the possibility for additional cryptocurrency regulation before adding it to your self-directed IRA.
"Currently, crypto is viewed as property, but if the IRS changes the asset type, it may become one that cannot be held in a self-directed IRA," Jariwala says. If that happens, "you might be stuck and forced to liquidateat an unfavorable time or face severe tax issues."
If, despite the risks, you still want to invest in cryptocurrency, try starting with an amount you can afford to lose outside of your retirement savings. Allocating a smaller portion of your overall portfolio can assist in hedging risk, while also giving you exposure to cryptocurrency assets.
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Don't miss: These 14- and 9-year-old siblings earn over $30,000 a month mining cryptocurrency
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It's possible to invest in cryptocurrency in an IRA, but experts warn against it - CNBC
El Salvadors Bitcoin day: The first of many or a one-off? – Cointelegraph
On Sept. 7, in a historic first, the small Central American nation of El Salvador adopted Bitcoin as legal tender.
The true significance of this day for how people all around the world exchange value and what meaning they ascribe to the concept of money will take some time to reify and be fully understood. Yet, what is already clear is that September 2021 will be up there next to January 2009 in the history books of the digitization of finance.
Surrounded by controversy, protests, bumpy infrastructure rollout how else? but also the joy and optimism of millions globally who look at this great experiment with hope, the Bitcoin Day marked the first instance of a sovereign state making a decentralized digital asset its national currency. Was it a success, after all?
A nation of under 7 million, El Salvador has long waived its claim for monetary sovereignty. In 2001, it ditched the coln, its national currency in use for more than a century, in favor of the United States dollar. The move made a lot of practical sense since the share of remittances a good chunk of them coming from U.S.-based Salvadorans in the countrys gross domestic product exceeded 16% at peak points.
At that time, the move by then-president Francisco Flores Prez sparked protests and was condemned by detractors who claimed it was undemocratic and allegedly benefitted the bankers and the rich.
Two decades later, President Nayib Bukele a forty-year-old who rose to power at the helm of a party called New Ideas added another chapter to El Salvadors monetary saga this time, supplementing a foreign currency circulating in the country with one unhemmed by borders.
Much like 20 years ago, there has been backlash concerning the Bitcoin Law. However, the same pollsthat show a lack of support for Bitcoin (BTC) as a new means of payment suggest that a large share of Salvadorans have a limited understanding of what it is and how it will affect their lives.
Furthermore, in many cases, resentment toward Bitcoin can be linked to resentment toward Bukele, who, despite robust approval ratings, remains a divisive figure whose alleged autocratic tendencies concern some international observers.
In sum, there are good reasons to believe that there is no powerful ideological opposition to the concept of decentralized finance in El Salvador, and whatever pushback currently exists will likely dissipate further down the adoption curve if implementation proves to be an ultimate success.
Meanwhile, the somewhat rushed launch of the payments infrastructure was, expectedly, far from seamless. The government-run Chivo wallet went down for several hours, and some retail workers reportedly didnt know how to process BTC payments. Soon after the launch, the president himself took on the role of customer support,tweeting updates on the state of the wallet service.
Yet overall, according to the accounts of those who were there to witness El Salvador making its first steps as a Bitcoin nation, things started to smoothen soon after a choppy start. Bart Mol, founder and host of the Satoshi Radio podcast,tweeted along his journey from Chivo ATMs that didnt work to successfully performing Lightning transactions to pay for pizza and coffee at separate retail locations.
The overall feeling, Mol concluded, was that of witnessing history.
Institutions of the global financial system seem less excited. The International Monetary Fund has been passive-aggressive about El Salvadors Bitcoin Law since it passed early this summer. Perhaps, if this experiment yields favorable results, the IMF and other global financial bodies will come around?
Some legal professionals are skeptical about this prospect. During a Discord ask me anything (AMA) session withCointelegraph Markets Pro subscribers last week, Cointelegraph general counsel Zachary Kelman opined that global financial institutions are unlikely to ever get on board with Bitcoin as national currency:
Other nation-states, however, are watching closely. Granted, El Salvadors position as the regions remittances leader, combined with its earlier experience in outsourcing the national money function to a foreign currency, makes for a rare combination. Most other nations have higher bars to clear even if they could muster political momentum for making a decentralized money legal tender.
Still, the potential favorable effects of El Salvadors move could nudge other countries to consider Bitcoin as a payment infrastructure more seriously. Amanda Wick, chief of legal affairs at blockchain analytics firm Chainalysis, told Cointelegraph that cryptocurrency is an ideal technology for remittances, and it is thus well-positioned to serve remittance-heavy economies:
The reported acceleration of other countries central bank digital currency research programs, the push to define cryptos legal status in Ukraine, and discussions to make cryptocurrency a legal alternative payment method in Panama can all be seen as carry-over effects of El Salvadors bold initiative.
Related:Slow to start: Crypto regulators lagging behind blockchain industry
Evidently, not every nation-state is in a position to embrace Bitcoin as the national currency. But on Sept. 7, virtually everyone was prompted to reassess where they stand on the digital money map of the world.
Regardless of the outcome of the El Salvador experiment, the pioneering example of the Central American nation has already pushed cryptocurrency deeper into the mainstream political agenda than it could ever get without recognition by a sovereign state.
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El Salvadors Bitcoin day: The first of many or a one-off? - Cointelegraph
Why Institutional Adopters of Crypto Are Looking Beyond Bitcoin – Institutional Investor
As more institutional investors adopt cryptocurrencies, allocators and crypto managers are looking beyond Bitcoin for opportunities.
Take for example, Bitwise, which last week launched what its calling the first large-cap cryptocurrency index fund without exposure to Bitcoin. The index fund is a nine-currency, ex-Bitcoin version of the companys flagship Bitwise 10 Crypto Index Fund, which launched in 2017 and includes the ten largest cryptocurrencies in the world.
According to Matt Hougan, chief investment officer of Bitwise, the decision to exclude Bitcoin was two-fold.
For one thing, he said many investors first came into the crypto markets through Bitcoin. Since then, new currencies have arisen and new products have dominated the space. In fact, over the past year, Bitcoins share of the total market capitalization of the crypto space fell from 69 percent to 42 percent, according to Bitwise.
The other reason, according to Hougan: Not everyone loves Bitcoin.
Bitcoin has a very specific role in the crypto market as digital gold, and many people think crypto has broader applications as the new internet of finance, Hougan told Institutional Investor. So some people would rather have a portfolio that excludes Bitcoin and just focuses on these more productive crypto assets.
According to Moodys Investors Service, cryptocurrencies are one of the key forces shaping the financial services industry, and investor demand for cryptocurrencies and additional digital advancements has extended well beyond an interest in Bitcoin. In a new report, the credit ratings agency argued that digital forces like stablecoins (a subset of cryptocurrencies that are linked to a particular asset, such as gold or the U.S. dollar), fintech, and central bank digital currencies have the potential to upend traditional financial institutions roles as middlemen in financial transactions.
Things like CBDCs are changing the fundamental nature of modern money that were all using, which is currently a product of private entities private commercial banks and changing that to allow for citizens, consumers, and corporations to have access to an electronic, public form of money, which is a direct liability of the central bank, said Stephen Tu, vice president and senior credit officer at Moodys.
Tu and his co-authors believe that blockchain-based cryptocurrencies, like Bitcoin, may not have the capabilities to change the nature of global banking. But stablecoins do. According to Tu, stablecoins have the potential to function as a widely-accepted form of payment in the future because of their stable, fixed value.
If you can have a stablecoin operate within a global tech ecosystem, theres a lot of value that could be had, Tu said.
At crypto index provider Bitwise, clients are largely institutional, including family offices, financial advisors, hedge funds, and institutions. Crypto is a great asset in institutional portfolios, Hougan said.
He argued that cryptocurrencies provide three key benefits to institutional portfolios: high potential returns, low correlation to other assets, and liquidity. But for many institutional clients, Hougan said educational challenges and behavioral burdens hinder widespread adoption of cryptocurrencies into portfolios.
As for the future, Hougan believes products like Bitwises ex-Bitcoin index will make it easier for institutional investors to invest in the crypto space, a shift that will eventually lead to cryptos normalization in institutional portfolios.
The question is changing from Why do you have crypto in your portfolio? to Why dont you? he said.
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Why Institutional Adopters of Crypto Are Looking Beyond Bitcoin - Institutional Investor