Blockchain Bites: MicroStrategy's Macro Strategy for Bitcoin Treasuries
Bitcoin is being hoovered up faster than it's mined, as Guggenheim predicts increased institutional inflows and Ruffer takes profits.
1. Mining firms are benefiting from the market rally. California’s $441 billion public pension fund increased its stake in bitcoin miner Riot Blockchain (RIOT) nearly sevenfold while Ethereum miners are cranking out record revenue.
- California Public Employees' Retirement System (CalPERS), the largest public pension in the U.S., held 113,034 shares in RIOT worth over $1.9 million at the end of 2020, according to Tuesday filings. That's up from Q3 2020, when CalPERS' 16,907 RIOT shares were worth a comparatively minuscule $49,000.
- Meanwhile, publicly traded bitcoin mining company Argo Blockchain bought 172.5 BTC in January, amid soaring revenue. The new bitcoin stash is currently valued above $6 million.
- Ethereum miners earned a record $830 million in January as network activity, fees and ether’s price all surged. Nearly 40% of total mining revenue came from network fees.
2. Industry experts are eyeing two bullish signs for crypto. First, balances of dai (DAI) and USD coin (USDC) on exchanges have hit lifetime highs, according to data from Glassnode. Meanwhile, Guggenheim research is placing $600,000 as a price target for bitcoin.
- Rising stablecoin balances could prefigure massive buys into the crypto ecosystem. “New flows [to crypto markets] are coming from more mainstream institutions participating [that] have a strong predisposition for transparent, trusted, regulated dollar stablecoins,” Circle’s Jeremy Allaire told CoinDesk’s Muyao Shen.
- While a six-figure price tag could be a ways away, Guggenheim Chief Investment Officer Scott Minerd reversed his previous bearish comments to say bitcoin – if it follows the golden path – will attract large sums of institutional money.
- Ruffer Investment Management, for instance, invested 2.5% of its $27 billion portfolio into bitcoin in November, and recently disclosed it took a $750 million profit on that deal, having sold approximately half its holdings at a market top around $40,000.
3. Trad meets crypto: Visa is working with crypto bank Anchorage to allow customers at traditional banks to "buy and sell digital assets such as bitcoin." This will come through a suite of application programming interfaces (APIs) for banks to plug and play into the crypto ecosystem.
- “This is shifting to the next phase of Visa’s strategy where we’re looking at how Visa can also be a bridge between the thousands of financial institutions … and help them tap into the growing world of crypto assets and blockchain networks,” Visa crypto lead Cuy Sheffield told CoinDesk’s Nate DiCamillo.
- Separately, investment firm Accelerate Financial Technologies has filed a preliminary prospectus for a new bitcoin exchange-traded fund (ETF) with Canada’s securities regulators.
The macro strategy
More than 15% of the total bitcoin circulating supply has been moved to “accumulation addresses,” according to the latest accounting by data firm Glassnode. This figure is often cited to show how holders are bracing for the long term.
Standing at a 3.5-year high, some 80,000 BTC have been moved to these addresses. Accumulation addresses is an industry term for wallets with at least two non-trivial incoming transactions that have never spent funds, according to CoinDesk markets reporter Omkar Godbole.
This latest milestone comes as bitcoin continues to leave exchanges. As CoinDesk has reported before, coin inflows onto exchanges typically indicates a looming sell-off.
“The continued locking up of bitcoin has been creating a sell-side liquidity shortage led by increased institutional buyers and has aided the recent bull run,” Godbole wrote.
Indeed, major market players are accumulating bitcoin. In December, Grayscale added 72,950 BTC to its assets under management, far outstripping the 28,112 BTC mined during that same period. (Grayscale and CoinDesk are wholly owned by Digital Currency Group.)
Meanwhile, MicroStrategy, an intelligence firm that made a name for itself in 2020 for going all-in on bitcoin, continues to flesh out its bitcoin treasury. According to Bitcoin Treasuries, the publicly traded firm now holds a total 71,079 BTC, worth over $2.9 billion.
The company's CEO, Michael Saylor, has become an industry advocate and has argued that corporations should invest their cash holdings in the hard-capped cryptocurrency. He famously called fiat a “melting ice cube.”
Today, MicroStrategy is hosting a conference where Saylor intends to pitch his cohorts on the value of bitcoin investing. Saylor said he plans to go over his “playbook,” including accounting and legal guidance. CoinDesk’s Danny Nelson will be covering the event.
“We’re going to have thousands of executives, officers and directors and advisers of corporations coming together in the first week of February and they all want to figure out how to plug bitcoin into their balance sheet, their PnL,” Saylor told CNBC's "Power Lunch" in January.
"This conference could drive interest in bitcoin further, and even if that does not translate to immediate price gains it will definitely have a positive, long-term effect," Joe DiPasquale, the chief executive of San Francisco-based bitcoin and cryptocurrency hedge fund BitBull Capital, told Forbes.
Indeed, if Saylor’s pitch is successful, the industry could see a number of new entrants from institutional money. It’s a future that Guggenheim Chief Investment Officer Scott Minerd, among others, has predicted.
As others have pointed out, bitcoin is rapidly approaching a moment when no more coins will be minted (estimated in 2140). Casa CTO Jameson Lopp put it as such: “The final bitcoin will be minted incrementally over a period of 40 years.”
The rush is on.
- INDIA INK? Proposed rules to limit cryptocurrency in India are still being debated, leaving the written rules up for interpretation. (CoinDesk)
- LUXURY ACCOMMODATIONS: Blockchain startup SUKU will move its high-end sneaker authentication system to Hedera Hashgraph, citing unbearable fees on Ethereum. (CoinDesk)
- OPSEC UPSET: A Navy couple used their military connections to steal and resell personal identifying information from civilians for bitcoin. (CoinDesk)
- ‘UNISWAP FOR NFTs’: Rarible raised $1.75 to build a DAO. (CoinDesk)
- NOT BLOCKED: Crypto personality Mike Dudas joins Paxos as stablecoin lead. (CoinDesk)
- HASHMASKS CRAZE: 16,000 NFTs sold for $9 million. (Decrypt)
- DEFI MORTGAGE: An engineer paid off his bank loan and refinanced using Notional Finance. (The Defiant)
- BIDEN’S BACKER: The Intelligencer profiled Sam Bankman-Fried, of FTX. (New York)
Who won Crypto Twitter?
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