We’re up a gear and coasting with big movers emerging from the shadows and all roads fleeing fiat. With everything from literal explosions to decentralised finance proving how centralised it is, this past month has been anything but eventful. It also doesn’t hurt that we got to taste some lofty heights, even if it was but for a brief moment.

→ Power moves in the Bitcoin market

→ Buffett backtracks but is still stuck in the stone age

→ Institutional Bitcoin investors revealed

→ DeFi gets shaken and stirred

→ And more

There’s a moment of respite and the build is back on, so why not delve into our latest edition of Analysed while you wait for the next break?

Bitcoin Market Summary

Bitcoin’s price has been pretty boring this past month if you look at it in a vacuum, up only a touch above +$500 USD to $11,500 USD ($16,000 AUD) since our last analysis. This, like always, is deceptive and betrays the true story. August has been something of an exploratory month for Bitcoin, with it reaching consistent highs above $12,300 USD ($17,100 AUD) for nearly a week before stabilising in the mid $11,000s. There was only one day in August that Bitcoin dropped below $11,000 USD and that was on the 2nd.

As usual, there’s speculation on price going up, down, around and probably inside-out; Bitcoin is a free-market beast built on volatility that consolidates as people wrestle with their faith in fiat and central banking. The usual stalwarts of silver and gold are through the roof and getting hold of them physically carries record premiums – as we’ll discuss below, Bitcoin may be heading in that direction as well.

General Market Summary

Global markets continued on their merry way despite COVID-inflicted disruptions and massive hits to profit margins, seemingly fuelled by hope that 2020 is just a bad dream.

In the US we saw continued growth from the majors, with our benchmark of the S&P 500 rising upwards of 150 points (+5%~) over the month on hope for a second round of stimulus checks and capital injection. The Fed also went public with research plans for a digital dollar, spurring interest in perceptions of liquidity.

Australia’s ASX 200 has remained consistent, with a minor dip early in the month due to fears of a COVID breakout and heavy profit losses. “Non-essential” businesses in Victoria have been sent back into shutdown following government orders, potentially shooting out the leg of an already half-crippled economy. JobSeeker and JobKeeper payments have begun a roll-back, with means testing and enforced job searches re-entering the equation. However, recent developments in Victoria may lead to some tinkering and potential reinstatement of the original scheme. Expect further stimulus beyond this, as well as enormous PR efforts to push consumer spending growth.

The AUD has strengthened yet again, rising to $0.72 USD, though this is hardly ideal buying power in the face of potential US stimulus.

Headlines

Ethereum Classic Gets Hacked. Again. Twice.

Cryptocurrency DeFi mainstay Ethereum Classic had a week it would rather forget. Suffering not one, but two 51% attacks, the cryptocurrency managed to lose in excess of $7 million USD worth of it’s tokens. Trading exchange OKEx, responsible for the highest amount of Ethereum Classic trade volume, has considered delisting the token after they lost $5.6 million in the hack.

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While Analysed won’t be going in-depth with Ethereum’s history and various centralised quirks, it’s important to understand that Ethereum Classic (ETC) is not Ethereum (ETH), but rather the original non-rolled back variant following the 2016 DAO incident induced split.

51% attacks are something many small-cap cryptocurrencies face the threat of due to the costs being a fraction of potential pay-offs. Organic, large-cap assets like Bitcoin are able to fend off these types of attacks due to the overwhelming cost required to overcome the network effect protecting the blockchain.

As usual this highlights the pitfalls in seeking massive overnight gains via alt-coins – you lack the requisite elements for a stable and secure asset and you as a retail gambler are at the beck and call of market manipulators. If you play with what are effectively crypto penny-stocks, just skip the middleman and go to a casino. 

If it’s centralised, whoever controls the house always wins.

Buffett Buys Gold

Warren Buffett never been one to hold back with his opinions on gold, savaging it as “magic metal [that] is no match for American mettle” and an inferior investment to value-producing assets like stocks or real estate

This makes Berkshire Hathaway’s recent Barrick Gold Corporation buy-in (valued upwards of $560 million USD) something of an anomaly. This purchase, while keeping with Buffett’s ethos of investing in value-producing assets rather than an outright physical asset is nonetheless a bearish shift in sentiment from The Oracle From Omaha.

Some have taken this acquisition as the potential primer for an entry into Bitcoin, however, Heisenberg Capital founder Max Keiser (@maxkeiser) maintains that it would not fit his investor profile due to a lack of outright value production. Instead, Keiser offers that market entry may come via a company associated with Bitcoin that produces active cash flow.

For the time being though, Buffett is still stuck in the stone age.

Industry Veteran Calls Bitcoin A “Safe Haven”

Long-time investment market leader George Ball (formerly CEO of Prudential Securities, current CEO of Sanders Morris Harris) has gone loud with his surprising thoughts on Bitcoin in an interview with Reuters, proclaiming them to be a potential new safe haven for investors as they flee fiat markets and find traditional defensive assets difficult to come by or volatile in and of themselves.

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Ball’s comments are as striking as they are damning:

“I’ve never said this before, and I’ve always been a blockchain, cryptocurrency, and blockchain opponent, but if you look right now, the government can’t stimulate the markets forever. The liquidity flow will end. Sooner or later, the government’s got to start paying for all of the stimulus, the deficits, and the very smart and well-deserved subsidies that it is providing to the people.”

Bullish on Bitcoin and bearish on the Fed, the tides appear to be shifting on Wall Street and Ball may just be one of many to come. 

Institutional Investors Revealed

Forbes recently revealed a list of the top 20 institutional investors in Bitcoin, however, due to a potential shift in SEC policy (threshold to report raised from $100 million to $3.5 billion), this may be the last time we get to see these holdings laid bare before us.

Grayscale Bitcoin Trust (GBTC) is something we have covered previously, having devoured a massive portion of Bitcoin produced over recent months and becoming the dominant entry into Bitcoin without actually buying Bitcoin. Those mentioned in this report have their Bitcoin exposure measured in the amount of GBTC stocks they hold.

Topping the list is ARK Investment Management with upwards of $20,000,000 in GBTC holdings, followed by ARK’s Next Generation Internet ETF ($17,000,000). Kinetics Portfolio Trust also maintains a strong presence, with 4 separate entries on the list. Slatestone Wealth and Rothschild Investment Corp are two interesting firms with smaller exposure (both below $1,000,000). You can view the full list on Forbes, with a full in-depth analysis of every element.

Despite the premiums carried when using GBTC for Bitcoin exposure, institutional investors are piling in and stock prices are soaring. Grayscale have stated that 84% of all current investors are institutional. If current acquisition rates hold, Grayscale will hold 3.4% of all Bitcoin by January according to a June Coin Telegraph report.

One can only wonder what might happen if 2020’s roving retail marauders find GBTC and smell easy gains.

Feature Focus

MicroStrategy CEO Announces Massive Buy-In

Michael Saylor’s (@michael_saylor) NASDAQ-listed business intelligence company MicroStrategy (MSTR) just bought 0.1% of Bitcoin’s entire supply, with it now accounting for 50% of their cash reserves. With the supply constraints of Bitcoin, only 978 of the 41,000 or so publicly listed companies in the US could make such a move going forward. 

I’ll let that sit in for a moment. A single company has just purchased 21,454 Bitcoin to split their reserve holdings in half. Not an ETF, not futures. Bitcoin.

Saylor spoke about the decision to go all-in on Bitcoin:

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Thibaut Maréchal (@thibm_) dissects this beautifully in both his article and Twitter summary, highlighting the “Bitcoinisation” of corporate treasuries as a means of risk-reduction for enterprises in the face of monetary expansion and future inflation.

Combined with the aforementioned Grayscale investment; any investment in MicroStrategy is now one in Bitcoin – it has become part of the institutional equation, with heavyweights like Vanguard and BlackRock now having stake due to these acquisitions. 

MicroStrategy has thus become a proxy for exposure to Bitcoin in the same vein as Grayscale, with Maréchal pondering at what point MicroStrategy transitions from being a software company to a Bitcoin ETF.

What’s clear is Bitcoin cannot be ignored by institutions any more.

Final Thoughts

We’re in another state of limbo and cogs have started publicly turning – seeing the extent to which Bitcoin is breaking it’s boogeyman asset image leads me to believe there may be a true and permanent step forward for the asset. Institutional adoption has been proven and we’re seeing bulls born from bears.

That’s Bitcoin though. The world continues to stay in 2020-mode while Fed printers are likely warming up for some fresh stimulus and election promises. The situation in Victoria has shown just how quickly we can go from 0-100 with lockdowns, business disruption and potential ruin.

So now let’s build for a bit before we get shot to the moon with many a Satoshi in hand.

Stack Sats and take care,

Jamie Grohman for Analysed by Amber.