Danny Nelson


CORRECTION (Oct. 14, 2020, 04:25 UTC): This article originally said Fidelity recommended that portfolios consider a 5% allocation in bitcoin. The language used was a hypothetical. CoinDesk regrets the error.

Fidelity Digital Assets said bitcoin’s market cap has plenty of room to grow in a Tuesday report on the benchmark cryptocurrency’s uncorrelated nature.

  • Director of Research Ria Bhutoria wrote that the crypto’s current market capitalization “is a drop in the bucket compared with markets bitcoin could disrupt.”
  • Bhutoria argued that while institutional inflows may damp bitcoin’s uncorrelated performance, the crypto is “fundamentally less exposed” to the “economic headwinds” that other assets will likely face.
  • Bitcoin is therefore a “potentially useful” asset for uncorrelated return-seeking investors.
  • “In a world where benchmark interest rates globally are near, at, or below zero, the opportunity cost of not allocating to bitcoin is higher,” the report said.

Author: Danny Nelson

Source: Coindesk: Fidelity Report Says Bitcoin’s Market Cap is ‘Drop in the Bucket’ of Potential

Square, the payments company helmed by Twitter CEO Jack Dorsey, announced Thursday it has purchased 4,709 bitcoins, a $50 million investment representing 1% of the firm’s total assets.

  • “Square believes that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system, which aligns with the company’s purpose,” the company said in a statement.
  • “We believe that bitcoin has the potential to be a more ubiquitous currency in the future,” said Square CFO Amrita Ahuja. “For a company that is building products based on a more inclusive future, this investment is a step on that journey.”
  • Bitcoin’s price jumped 2.5% following the announcement, while shares in Square popped around 1%.
    Characterized by Square as a mission-driven investment, Square’s $50 million buy comes amid Dorsey’s very public spat over corporate responsibility with another crypto-friendly CEO, Coinbase’s Brian Armstrong.
  • Dorsey chided Armstrong last week for discouraging his employees from engaging in activism in the workplace. Armstrong said it was a corporate imperative; Dorsey framed it as hypocritical.
  • “Bitcoin (aka ‘crypto’) is direct activism against an unverifiable and exclusionary financial system which negatively affects so much of our society,” Dorsey tweeted in response to Armstrong’s blog post.
  • Square is also now the second technology firm to go long on bitcoin in recent months after MicroStrategy, a business intelligence firm, crowned the crypto as its treasury reserve asset of choice.
  • MicroStrategy invested $425 million into bitcoin, according to a series of disclosures that pumped the stock’s value and revealed its CEO, Michael Saylor, to be an unexpectedly vocal bitcoin maximalist.
  • But Square’s bitcoin investment is far more in line with its corporate identity and business services than was the case for MicroStrategy.
  • Square’s Cash App is a critical bitcoin entry point for many retail investors. It has become a major revenue driver for the publicly traded fintech.

Author: Danny Nelson

Source: Coindesk: Square Puts 1% of Total Assets in Bitcoin in Surprise $50M Investment

MicroStrategy is prepared to HODL its bitcoin for at least a century.

Or so said the business intelligence firm’s founder and CEO, Michael Saylor, in an interview with CoinDesk on Tuesday, shortly after he announced on Twitter that MicroStrategy was doubling down on the godfather cryptocurrency with the purchase of $175 million more BTC.

“I want something that I could put $425 million into for 100 years,” Saylor told CoinDesk.

In the last two months Saylor has transformed his company’s once-sleepy cash surplus into a nearly half-billion-dollar bet on bitcoin, the “digital gold” Saylor is certain will outlast his tenure.

“If [my successor is] staring at this thing, it’s still working,” he said.

“This thing” is a heaping pile of 38,250 bitcoins. The publicly traded firm bought $250 million worth on Aug. 11, days after telling shareholders that cash was no longer a safe place for its excess $500 million. Tuesday morning, it bought $175 million more.

Forget about parking the balance sheet surplus in inflation-prone cash or low-yield bonds or overextended tech stocks, Saylor said. In a market like this – and in the future he said is certain to come – there are only two good places to put excess cash to work: stock buybacks and bitcoin.

It’s a radical about-face for a man who seven years ago declared bitcoin’s days were numbered.

An unlikely revelation

“I went down the rabbit hole” during COVID-19, Saylor said, admitting he “was wrong” to have doubted bitcoin back in the $600 range.

“I wish I knew then what I know now,” he said.

The first step in his journey to conversion came from an unlikely source for a newly minted bitcoin maximalist: The sale of the “” domain to EOS creator for $30 million in July 2019.

Fast forward to 2020, and Saylor found himself reading up on bitcoin. He learned as much about crypto as fast as he could. Saylor said he pored over essays by “bitcoin luminaries,” listened to Nathaniel Whittemore’s and Anthony Pompliano’s crypto podcasts, scoured the internet for Peter Schiff’s bitcoin debates with Erik Voorhees and lost himself in Andreas Antonopoulos’ media empire.

COVID-19’s global business woes were actually a boon for MicroStrategy. Saylor said the firm soon realized it had far more cash on hand than it needed to operate in a newly streamlined virtual-first world.

Moving away from the dollar is now Saylor’s primary concern. He said he can’t stand the inflationary risk.

In bitcoin, he and the firm’s decision-makers have found what they deem the obvious choice for the coming century of QE infinity.

“I started to cheerfully assign homework” to MicroStrategy’s executives and directors, Saylor said. He staged “a series of learning exercises to bring everyone up to speed.” If MicroStrategy was really going to move millions into bitcoin, then everyone had to be on board.

How to go all-in

There was a lot of ground to cover, Saylor said. But in three months’ time, he and his executives had accrued the crypto education, and dealt with the myriad legal, custodial and security issues that he said stand in the way of publicly traded companies getting into crypto.

Then, in late July, executives unveiled the game plan on the firm’s Q2 earnings call: MicroStrategy would seek to invest up to $250 million in the next 12 months “in one or more alternative investments or assets which may include stocks, bonds, commodities such as gold, digital assets such as [b]itcoin, or other asset types,” MicroStrategy resident Phong Li said on July 28.

It was a declaration so clouded in corporate vagueness that nobody really noticed the news.

A week passed before Castle Island Ventures partner Matt Walsh resurfaced the earnings call transcript in a tweet. He noted how the Nasdaq-traded stock was “diversifying its cash holdings to include bitcoin.”

Walsh gave the news a double-eye emoji. Watch this, he was saying.

Observers didn’t have to wait long.

Six days later MicroStrategy poured all $250 million of its inflation-hedging surplus into bitcoin. Gone was the 12-month timeline and the promise to diversify across gold and other alternative assets. All bitcoin, all the time.

Come September, its board of directors had recognized bitcoin as MicroStrategy’s primary treasury reserve and hinted in an SEC filing that more buying could be on the way.

It shattered the self-imposed $250 million bitcoin ceiling mere hours later.

As of press time, MicroStrategy has converted $425 million into bitcoin. The stock has surged 30% since its first bitcoin buy on Aug. 11. It was up 9% on Tuesday.

Other publicly traded tech firms – think Apple and Google – park billions of excess capital in cash and leave it there for years. But Saylor didn’t want to leave MicroStrategy’s millions in a bank account where the specter of inflation could slowly whittle it away.

“We just had the awful realization that we were sitting on top of a $500 million ice cube that’s melting,” Saylor said. MicroStrategy has settled on bitcoin as the treasury alternative.

“This is not a speculation, nor is it a hedge,” said Saylor. “This was a deliberate corporate strategy to adopt a bitcoin standard.”

Author: Danny Nelson

Source: Coin Desk: Bitcoin CEO: MicroStrategy’s Michael Saylor Explains His $425M Bet on BTC

Fidelity Investments’ chief strategist is heading a new bitcoin index fund that appears to be Wall Street’s latest play for high-dollar institutional crypto bets.

  • “Wise Origin Bitcoin Index Fund I, LP” has a $100,000 minimum buy-in and a high-ranking executive officer to boot: Peter Jubber, head of strategy and planning for the increasingly crypto-friendly investments giant Fidelity.
  • Disclosed in a Wednesday morning filing with the Securities and Exchange Commission, the fund is the latest example of Wall Street veterans warming up to bitcoin. Fidelity, one of the largest mutual fund firms in the U.S., is also leading the Street in bitcoin research and services.
  • Wise Origin links back to Fidelity Investments via Jubber and Fidelity’s brokerage service and distribution subsidiaries, both of which are set to receive sales compensation from the new fund. It also shares a Boston office building with Fidelity.
  • Fidelity declined to comment on its ties to the fund. A Delaware corporation called FD Funds GP is Wise Origin’s general partner, and Jubber is FD Funds’ president.
  • While it is not known how the fund will approach bitcoin investing, Jubber waxed bullish on blockchain in a 2017 podcast sponsored by Fidelity. At the time he said his firm had sketched out 10 years of potentialities for the institution-disrupting tech.
  • “Every incumbent should be spending time and money on this topic to understand it, at least to understand the threat,” he said in the podcast. “But I think there’s just a massive opportunity.”
    The fund has yet to raise any capital from investors.

Author: Danny Nelson

Source: Coindesk: Fidelity’s Chief Strategist Starts Bitcoin Index Fund

Publicly traded business intelligence firm MicroStrategy purchased 21,454 bitcoin on Tuesday, effectively pouring all $250 million of its planned inflation-hedging funds into the digital currency.

  • Disclosing its bitcoin buy alongside an equivalent stock buyback in a Tuesday Securities and Exchange Commission filing, MicroStrategy, a Nasdaq-listed software firm worth over $1.2 billion, said the cryptocurrency provided a “reasonable hedge against inflation” in a press statement shared with CoinDesk.
  • “This investment reflects our belief that bitcoin, as the world’s most widely adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash,” said CEO Michael J. Saylor.
  • Saylor cited forces working to weaken fiat currencies – COVID-19, global quantitative easing measures, political and economic uncertainty – but also the technical and qualitative aspects that he said give the bitcoin blockchain strength.
  • “We find the global acceptance, brand recognition, ecosystem vitality, network dominance, architectural resilience, technical utility and community ethos of bitcoin to be persuasive evidence of its superiority as an asset class for those seeking a long-term store of value,” Saylor said.
  • The capital allocation quickly fulfills Saylor’s late July promise to shareholders that MicroStrategy would buy back $250 million in stock and invest an additional $250 million in gold and bitcoin over the next 12 months.
  • The belief was that these and other “alternative investments” would protect MicroStrategy’s dollar-heavy balance sheet.
  • It is now clear that half of the $500 million bet turns entirely on bitcoin. MicroStrategy “accordingly has made bitcoin the principal holding in its treasury reserve strategy,” Saylor said.

Author: Danny Nelson

Source: Coindesk: MicroStrategy Buys $250M in Bitcoin, Calling the Crypto ‘Superior to Cash’

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