Is Institutional Support Coming to Bitcoin?
The Bitcoin story has been one of the rapid rallies of late, at least when it comes to short-term prices. In 2017, the story centered on the craze of retail investors who began to become interested in Bitcoin and other cryptocurrencies and began to discover how to navigate the rise of ICOs.
Now, in 2020 and 2021, support appears to come from quasi-institutional forces - from high net worth individuals to the family offices of some of the wealthiest people on Earth to hedge funds like Paul
Theodore Jones.
However, what gives one pause to think - and perhaps some unwanted hope - is the idea that corporate support is nearing or already present here from the world's largest publicly traded companies, governments / sovereign wealth funds, and central banks.
While many central bankers and government governors have been registered as against bitcoin, and everyone from the central government of the People's Republic of China to the president of the European Central Bank, there are small breaks in the fabric of true institutional support for bitcoin.
Local municipalities in the United States are starting to consider putting their city coffers in Bitcoin. This has been noticeable with Miami Mayor Francis Suarez, but there are other politicians statewide and even at the federal level who have views in favor of bitcoin such as Colorado Governor Jared Police and Senator Loomis in Wyoming.
Not only can those who control local and state coffers help pass Bitcoin-friendly legislation, but they can also use their city budgets or state coffers to buy bitcoin directly, as Miami is currently thinking. Local governments in the United States may then set examples of cities around the world.
While central and federal governments, nation-states, as well as central banks, may be slower to adapt and buy bitcoin, a new generation of leaders in federal localities, could push the Bitcoin engine forward as part of the policy experiment while allowing enough time for an entire generation. More Bitcoin-compatible politicians and regulators may take control of higher levels.
Publicly traded companies have already started adopting bitcoin as well, most notably with MicroStrategy MSTR, Michael Saylor, and Tesla TSLA with their recent purchases of $ 1.5 billion.
When Treasury bonds start to buy bitcoin, publicly traded companies will start buying bitcoin even if their field of business is not directly related to bitcoin, for example, bitcoin miners or those looking to create bitcoin exchanges.
This will be led by the founder - as seen with Jack Dorsey and Square SQ Crypto. Businesses tend to buy on dips like when Square just bought about $ 170 million in bitcoin. This will somewhat result in soft ground for Bitcoin's price.
This will lead to interesting impacts beyond just payments and corporate support - Jack Dorsey recently partnered with Jay-Z to fund the most generous Bitcoin Development Support Fund to date.
Included in Elon Musk's announcement was tacit support for the public bitcoin ecosystem. The idea brought up there was to accept bitcoin for Tesla vehicles, but it could go much deeper than that.
With Tesla's small payments, innovation may help with the Lightning Network and other ways to process microcontroller - and it could be scaled further, using Tesla as an example, and possibly as a funder. We might see the same path other entrepreneurs started with Elon: first, by participating in the purchase of Bitcoin, and then by supporting the development of Bitcoin's core innovations.
Saylor's role as one of the first to put billions of dollars in value with Bitcoin is also something worth looking at. With his encouragement and knowledge, other public companies may take the same steps that Elon Musk has taken.
Now we move on to the next component - central banks and sovereign wealth funds. Many of their leaders owe Bitcoin almost instinctively due to the perception it will.
Many of the countries that are using Bitcoin now are those that have been trapped in them due to their exclusion from the global trade or financial system - for example, countries that are subject to sanctions by the United States such as Venezuela and Iran.
However, there are signs of experimentation with the idea of decentralization with currency swaps and more. And it is possible that as more regions begin to adopt it and more lawmakers begin to accept bitcoin contributions, there may be a change in how a new generation of regulators views cryptocurrency.
Perhaps in the sudden mainstream adoption of Bitcoin, this move may become inevitable with or without the explicit approval of central bankers.
They will, just as some high net worth individuals do now, view cryptocurrencies as an asset class that they cannot afford to miss despite their ideological convictions or other investments.
If 2017 is the time retail investors take the lead, the current boom will likely start with family offices and high net worth individuals.
It's worth considering how far the boom could go if institutional support indeed - frequent purchases from public companies, cities, and possibly ultimately, sovereign wealth funds, pensions, and central banks, continue to boost and accelerate Bitcoin's groth
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