Rick Rieder, the chief investment officer of the world’s biggest asset manager Blackrock, made some bullish statements about Bitcoin on CNBC’s Squawk Box this week1. Commenting on millennial’s comfort in embracing new technologies, Rieder noted that Bitcoin was “here to stay”.
It could be said that although Rieder doesn’t have Bitcoin in his portfolio just yet, he was optimistic about its future. “Do I think it is a durable mechanism that could replace gold to a large extent? Yeah, I do, because it’s so much more functional than passing a bar of gold around,”2
Rieder’s opinions come on the back of an outstanding November for the coin, which has seen Bitcoin market value hit three-year highs of $19,000. With this run gathering real momentum, some analysts suggest BTC could hit $100,000 by 20213.
What Does This Mean For Bitcoin As An Investment?
The co-founder of Morgan Creek Digital, Anthony Pompliano, claimed that Bitcoin was now “the winner of a supply-and-demand exercise”4. With low-interest rates, coupled with the Federal Reserves inflation target of 2%, have left Bitcoin looking more and more attractive to institutional and retail investors, he said.
Pompliano’s comments come on the back of similar thoughts from billionaire investor Stanley Druckenmiller5. He suggests the Federal Reserves Covid-19 stimulus maneuvers will cause a sharp rise in inflation, with Bitcoin and gold offering a safe refuge for investors. While Bitcoin’s relevance as a hedge against inflation is well-known, it’s not the only thing driving growth.
How Has This Come About?
A possible answer to this question involves the recent price rise of Bitcoin. This is due to the overall shortage of Bitcoin, according to a recent report by the investment firm Pantera Capital6. Having cited Twitter CEO Jack Dorsey’s Cash App, Square, as being a massive driver of growth recently — buying an estimated 40% of the new coins on the market — Pantera suggests news that PayPal now allows its 300m, active users, to buy and sell Bitcoin is having a significant impact on prices.
“When PayPal went live, volume started exploding. The increase in itBit volume implies that within four weeks of going live, PayPal is already buying almost 70% of the new supply of bitcoins.” states the report. “PayPal and Cash App are already buying more than 100% of all newly-issued bitcoins.”7
To make things even sweeter, it’s not just good news for Bitcoin’s growth. Between PayPal, CashApp, and trading platform RobinHood, over 350m users now have access to Bitcoin and other cryptocurrencies like Ethereum, Litecoin, and Bitcoin Cash. Increased retail access through trusted and familiar platforms is precisely what space has needed to realise sustained progress toward mainstream adoption.