U.S. President Donald Trump said the value of Bitcoin and cryptocurrencies are based on “thin air.” Yet, Wall Street is increasingly investing in Bitcoin.
Grayscale, an investment firm that enables institutions to invest in Bitcoin through a publicly-traded vehicle, saw 88% of its investments come from institutional investors in the first quarter of 2020.
Fidelity, which manages $2.46 trillion in assets, found in a survey that about one third of institutions in U.S. and Europe are invested in cryptocurrencies.
Following the lead of billionaire investor Paul Tudor Jones, data shows that institutions are beginning to perceive Bitcoin as a store of value.
In July 2019, President Trump criticized Bitcoin and crypto assets. He said their value is highly volatile and are not considered as money.
President Trump wrote:
“I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity.”
But, in the same statement, President Trump emphasized that the U.S. dollar is the most dominant currency in the world and it will stay that way.
The need to mention the dominance of the dollar along with Bitcoin and cryptocurrencies by the President showed that mainstream awareness of the emerging asset class was growing.
“We have only one real currency in the USA, and it is stronger than ever, both dependable and reliable. It is by far the most dominant currency anywhere in the World, and it will always stay that way. It is called the United States Dollar!” President Trump noted.
As the world encounters heightened geopolitical risks, global uncertainty, and an economic slump, institutional investors are portraying their willingness to take a risk in investing in a relatively new asset that could be a hedge against inflation in the long run.
In a famous essay, Xapo CEO Wences Casares laid out his investment thesis for Bitcoin and why he thinks BTC could reach $1 million.
Casares said Bitcoin is not an asset nor does it have intrinsic value. But, it is money and it transfers value effectively in a decentralized manner.
The same can be said about gold. By nature, gold does not have intrinsic value. Over time, because people considered gold to have value for thousands of years, it is perceived as a store of value.
As Tudor Jones said, Bitcoin will gain value and credibility every day that passes. Casares noted a similar point:
“Bitcoin is not an asset. It does not produce earnings or dividends and it does not generate interest. And Bitcoin has no intrinsic value. Bitcoin is simply money and most forms of good money have no intrinsic value.”
Bitcoin is only 11-years-old. It is not possible to conclusively state that BTC will become a world currency and evolve into an effective hedge against inflation.
But, Wall Street and institutional investors are taking the bet that BTC will eventually turn into an established store of value and money, like gold did over time.