One by one, the big institutions are piling into bitcoin.
Just after Bitcoin's first modest correction since the start of its March rally which prompted an amusing twitter meltdown by Nouriel Roubini, we reported that one of the world's biggest fixed income asset managers, Guggenheim Partners, jumped on the bitcoin bandwagon when it announced that it was reserving the right for its $5.3 billion Macro Opportunities Fund to invest in the Grayscale Bitcoin Trust whose shares are solely invested in Bitcoin, and track the digital asset’s price less fees and expenses.
Guggenheim's (partial) embrace of Bitcoin following PayPal's announcement a few weeks later that it had enabled crypto transactions for all its clients, sparking the latest leg higher in bitcoin. It also came following glowing endorsement from legendary investors such as Paul Tudor Jones and Stan Druckenmiller, and in the aftermath of Jack Dorsey's "other" company, Square, which said in October that it bought 4,709 bitcoins, worth approximately $50 million, about 1% of Square’s total assets.
But the biggest "first mover" in the space was business-intel firm MicroStrategy, which on August 11 sent a shockwave around the globe when it announced it had poured all $250 million of its planned inflation-hedging funds into the digital currency. Then last week, not content with the 100% return its stock has generated since then, on Friday MicroStrategy announced that it has bought even more Bitcoin, first in the form of $50 million in outright purchases and then, on Wednesday the company upsized a $400 million debt offering to $550 million, whose proceeds would be used to purchase even more bitcoin.
More are following: overnight, the venerable Massachusetts Mutual Life Insurance company, better known as MassMutual, said it purchased $100 million in Bitcoin for its general investment fund, according to Bloomberg. The mutual insurer, which has been around since 1851, also acquired a $5 million minority equity stake in NYDIG, a subsidiary of Stone Ridge that provides cryptocurrency services to institutions, according to a statement. NYDIG, which already keeps more than $2.3 billion in crypto assets for clients, will provide custody services for MassMutual’s Bitcoins.
To be sure, the investment is a tiny fraction of MassMutual's assets, and represents 0.04% of the general investment account of nearly $235 billion as of Sept. 30, MassMutual said. But much more is likely to follow: "We see this initial investment as a first step, and like any investment, may explore future opportunities," spokeswoman Chelsea Haraty said in a email.
What really matters is that the momentum in capital allocation is clearly shifting with even veteran, established and reputable institutions starting to convert their fiat into crypto, something we predicted would happen three weeks ago.
MicroStrategy Hits 20-Year High After Citron Call, Bitcoin Jump— zerohedge (@zerohedge) November 25, 2020
Here comes the new "blockchain" bandwagon: Which company will convert its cash into bitcoin next?
Alternatively, what insiders are now saying is that buying bitcoin (in moderate amounts) is a better value proposition than buying back stock.
Bitcoin has more than doubled in price this year, and hit an all-time high earlier this month; as more institutions shift into cryptos, the price will only go higher.