An increasing amount of Bitcoins is being accumulated by institutions.
This was evident once again on Tuesday, when Stone Ridge Asset Management revealed to Forbes that it had purchased 10,000 BTCs – equivalent to one percent of assets under management.
Investors believe that a further institutional adaptation of the crypto currency could lead to parabolic prices.
How much could Bitcoin rise through institutions?
Bill Barhydt, CEO of Abra and former employee of the CIA and Goldman Sachs, believes that BTC would rise sharply if only 5% of the liquid assets held by the nine largest companies in the S&P 500 were to be invested in Bitcoin:
„Nine firms in the S&P 500 alone have nearly $600 billion in cash and short-term investments. 5% of those that would go into #Bitcoin (or $30 billion) would probably be five times the price of Bitcoin, given the lack of sellers. (3/6).“
Although this calculation may not quite work out in your head, you should consider Fiat amplifiers. The amplifier is a concept where for every Fiat dollar invested in Bitcoin or crypto currencies in general, the market capitalization of the room increases by more than $1.
Estimates suggest that the fiat amplifier is approximately two to 25 times higher, depending on the phase of the market cycle the crypto currencies are in.
At times when investors expect upside potential, the fiat booster grows as investors do not want to sell their coins too early.
Increase of BTC exposure
Barhydt analyzes the institutional adaptation situation as he tries to increase his personal commitment to Bitcoin. Barhydt „is considering doubling the allocation of #Bitcoin in my personal portfolio to 25%“.
In his explanation of why he thinks this is a good idea, he refers to inflationary tendencies:
„Given the acceleration in currency inflation and the likely subsequent price inflation, this seems a better weighting than my current 12%.
He adds that his contacts say that returns in old markets like stocks are likely to be „subdued“ for the next five years. This trend could lead to capital being directed into alternative investments that may be able to provide healthy returns – such as gold and Bitcoin.
The comments are reminiscent of the statements of a number of other investors in the crypto space who have dramatically increased their Bitcoin exposure against the current macro background. Raoul Pal, CEO of Real Vision, for example, has invested more than 50% of his liquid net assets in Bitcoin.