- Bitcoin’s record-breaking pump yesterday was not an accident, being a result of timing and external influences
- Three news stories in particular helped light the fuse that shot it through $20,000, all of which came out right before the pump
- Billions of dollars in institutional investment and a $900 billion stimulus package did the trick
Bitcoin’s record-breaking end to the year hasn’t just been a matter of chance. Instead it has been the result of a number of external factors and good timing. An extended bear market plus an unprecedented global crisis has resulted in Bitcoin’s true value being brought to the fore, and even yesterday’s pump through $20,000 was directly impacted by three external events, all of which occurred within 24 hours of the move, that would not have been foreseen at the start of this year.
One River Asset to Spend $1 Billion on Cryptocurrencies
As Bitcoin hovered around $20,000 yesterday it was revealed that One River Asset Management, a hedge fund specializing in volatility bets, was a massive cryptocurrency investor, having bought up more than $600 million in Bitcoin and Ethereum in recent months. In addition the firm added that it had commitments to add to its haul in the coming months, taking its holdings to $1 billion, with CEO Eric Peters commenting in an interview that, “There is going to be a generational allocation to this new asset class” and that “The flows have only just begun.”
Ruffer Investment Divests $740 Million into Bitcoin
The day prior to the One River news, it was confirmed that Ruffer Investment, which manages over $20 billion in assets, allocated 2.5% of its holdings to Bitcoin throughout November, equating to some $740 million. Ruffer informed shareholders of the move on Tuesday, explaining the rationale behind the investment:
We see this as a small but potent insurance policy against the continuing devaluation of the world’s major currencies. Bitcoin diversifies the company’s (much larger) investments in gold and inflation-linked bonds, and acts as a hedge to some of the monetary and market risks that we see.
$900 Billion Coronavirus Relief Package Coming
As if to purposefully back up Ruffer’s reasoning, reports emerged Wednesday that congressional leaders were close to agreeing a $900 billion coronavirus relief package for struggling Americans, adding to the $3 trillion already printed by the U.S. Treasury to cope with the pandemic.
Another money printing episode would further devalue a dollar which, according to the U.S. Dollar Index, has crashed 13% since March. Many prominent financial figures have pointed to this money printing as another nail in the coffin of fiat currency, which has in turn shone a spotlight on other fixed-supply assets such as Bitcoin.
Record Breaking Day is Far From Surprising
With these three news stories coming in quick succession, it was no surprise that Bitcoin was able to burst through $20,000 yesterday. While it will of course take some time to cool off following its mega run, it is clear that the institutional scrap has begun, and with Bitcoin’s new supply being fought over by the likes of PayPal, Grayscale, and Square, those institutions are running out of places to buy quietly…