Since the beginning of the year, the entire market has been riding on the back of institutional investors entering the space. The news of big players stepping in also had a massive impact on the price, especially with institutions such as Nasdaq, Fidelity and Intercontinental Exchange raising the hopes and expectations of retail investors.
Currently, a majority of the market is of the hope that institutional investors are going to be entering the space this coming year.
Anthony Pompliano, the founder of Morgan Creek Digital Assets and Ari Paul, the CIO of Blocktower – a leading cryptocurrency investing firm, discussed the same topic, in the latest episode of Off the Chain. They spoke about the reason why everyone else has not started participating in the space yet, taking into consideration that institutions like Yale have taken the first step.
On this, Ari Paul said:
“So I think there’s one more step to how this always unfolds, which is, you need the success data point. But then, the phrase I like that applies to so many circumstances with anything kind of market psychology or investor psychology is fear verses FOMO, what is the driving force for the investor in that time? Is it fear of loss, fear of career risk, fear of looking stupid, or is it fear of missing out?“
The CIO went on to say that since Yale has made the first wave of the bet, if there is a quarter or a year, wherein their “tiny allocation” goes up by 200% then this would bring about a return of more than the other 99.5% of their portfolio. This, in turn, would make a huge wave and every other CIO, with investment firm around the country being questioned on passing the investment.
Paul stated that this would effectively change the perspective from investing in “this massive risk to the risk of not”, adding that this would not be possible unless there is a successful data point.
This was followed by Pompliano pointing out that Bitcoin already has a successful data point, being the best performing asset class in the last 10 years. He went on the say that it is still 400% up in the last two years, even though the market isn’t very bright this year. Pompliano said:
“But the performance has still outperformed everything else in your portfolio with those drawdowns. Why is that not good enough success data point is it because the institutions weren’t actually and they can’t say we evaluate the situation we made the decision and here’s our specific returns versus like back testing or what’s the thought process”
To this, Ari Paul stated that most of investment decision making is bureaucratic to a certain point and that there are rarely individuals controlling billions of dollars in capital. He said:
“The decision making plays out like this, it’s you’re not looking in the abstract, you’re competing psychologically against specific players. So the endowment world, Harvard and Yale and UChicago and UPenn, they don’t care how sovereign wealth fund in Dubai did, they don’t care how a pension fund in Japan did.”
He went on to say that these endowments care about the performance of 10 other endowments in the US as that is their benchmark and that is what “their alumni compare them to”. He further added:
“And so if no one in if those top 10 endowments weren’t in crypto last year, the results never happened, didn’t matter. There’s no psychological pressure to follow the herd because the herd is those 10 endowments for those 10”
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Bitcoin’s censorship resistance, freedom make it a game changer in the economic industry
Over the years, the global economic industry has witnessed significant changes. However, no change has been more significant or essential than the one introduced by the concept of virtual assets or Bitcoin. Today, Bitcoin and other virtual currencies are almost as essential as fiat money and despite the fact that digital assets have not reached worldwide adoption, the pace of growth has been substantial.
In a recent panel discussion, Jedidiah Taylor, CEO and Founder of Decent.Bet, the smart contract-based sports betting platform, stated that the idea of Bitcoin and blockchain technology projected a perspective of freedom and honesty which allowed individuals to have direct control over their own capital, without any oversight supervision from financial institutions.
The sentiment was followed by Nico De Jonghe, Founder and CEO of NDJ Investment Group, who added that the threat of decentralized assets loomed the largest over centralized institutions like banks, who were worried of the future prospects offered by Bitcoin and its impact on the long-term financial situation.
Tone Vays, a reputable analyst and Bitcoin proponent, opined and stated that Bitcoin’s biggest strength was the fact that it was completely “unconfiscatable” and that one’s BTC is completely safe if it is protected and secured with attention. The characteristic of censorship-resistant value transfer is also an absolute game-changer for Bitcoin, allowing it to competitively exist in the financial system.
The value of Bitcoin has often been criticized in the past, but its valuation has consistently proven its worth. In fact, Bitcoin has grown by more than 150 percent in 2019.
At press time, Bitcoin was priced at $11,371, with a market capitalization of over $202.18 billion. The staggering valuation of an asset that was unheard of 10 years ago, further underlines the potential of Bitcoin in the current market scenario and for the future economies.
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