Grayscale CEO: Firms race to buy Bitcoin as mood shifts from ‘why’ to ‘why not?’

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Grayscale CEO Michael Sonnnenshein says institutional demand for Bitcoin (BTC) has only increased, moving into 2021, following a record-breaking year that saw Grayscale’s assets under management soar to new heights.

Sonnenshein told CNBC’s Squawk Box on Feb. 10 that the record inflows witnessed last year have continued, and interpreted this as a sign that Bitcoin’s current upsurge could continue.

Contrary to narratives emanating from government entities, Sonnenshein says regulation is not a concern for would-be investors, many of whom, he claimed, are satisfied that enough regulatory clarity has been provided.

Sonnenshein said, “Conversation point number one starts around regulatory concerns, and actually, a lot of those conversations are characterized by a lack of regulatory concerns. A lot of the folks making decisions around this realize how much regulatory clarity has been provided around this.”

In the same week that Tesla invested $1.5 billion into Bitcoin, Sonnenshein says most institutional investors are happy to edge into Bitcoin over time, rather than throwing all their eggs into one basket.

“I think the second piece of the conversation is around sizing and timing. So you’re seeing corporations think about anywhere from, on the low end, 25 basis points, to, on the higher end, maybe 100 or 200 basis points over time. And they recognize that they don’t need to get invested all at once.”

For context, Tesla recently invested roughly 770 basis points, or 7.7% of its gross cash holdings, into Bitcoin. Sonnenshein said the investment strategy taken by MicroStrategy might be more typical of future buyers. MicroStrategy bought $1 billion worth of Bitcoin across the span of 2020.

“They’ve seen other corporations like MicroStrategy legging into this trade over time, and they ultimately believe in the growth of this. So buying Bitcoin whether it’s here, ten percent higher, or ten percent lower, ultimately, is not going to matter if they think Bitcoin is going to have the type of growth they think it is going to have over time,” he stated.

According to Sonnenshein, the question surrounding Bitcoin is changing from “why?” to “why not?,” as the leaders of major tech companies like Tesla and Twitter flood into the cryptocurrency market. Sonnenshein thinks more “visionaries” will follow the likes of Elon Musk in buying Bitcoin. He said:

“I wouldn’t be surprised to see there being almost some sort of a race now — you have Elon Musk, you have Michael Saylor, Jack Dorsey. You’re gonna see a lot of other visionary leaders in disruptive companies actually realizing that it’s really moved from ‘why’ to ‘why not’, and see which companies are next to get involved in having Bitcoin as part of their treasury program.”

The signals all look good for 2021, according to Sonnenshein, who says institutional inflows have already gained momentum since the start of the new year.

“If flows are any indication of investor interest on the heels of a record-breaking 2020, I’m very pleased to say, and encouraged that that momentum is not only continuing this year, but is actually accelerating. So we’re seeing very very sustained and growing demand from a lot of institutional players at the moment,” he concluded.

A new non-profit aiming to fund Bitcoin development education and research has been approved for special tax status, conferring benefits on donors.

Brink, which launched in the fall, has been approved as a 503(c)(3) organization according to a Feb. 10 blog post. The status both exempts Brink from federal taxes and provides some interesting benefits to donors, especially considering their use of Bitcoin. 

Donations to 503(c)(3) organizations in the U.S. have always been an important tax write-off, but considering the long-term confusion over the IRS seemingly asking for Bitcoin users to pay capital gains taxes on any use of Bitcoin as a payment. In its announcement, Brink says that it offers an alternative:

"Donations of long-term appreciated assets like Bitcoin generally don’t incur capital gains tax and can be claimed as an income tax deduction for the full fair-market value."

Headed by Bitcoin core developer John Newberry, Brink runs fellowship and educational programs for new devs. The legal status as a 503(3)(c) non-profit will also open Brink up to new disclosure requirements, which Bitcoin's innate transparency may make simpler. 

However, the BTC address that Brink advertises on its Twitter feed appears to be unused, suggesting that its donations from existing sponsors like the Human Rights Foundation and Square Crypto have been coming through other channels or even fiat. Newberry had not responded to Cointelegraph's request for comment as of publication time. 

The confusion over having to pay capital gains taxes on any payment in Bitcoin had led many to call for a de minimis on the value of those payments before the IRS can come for them. 

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