Bitcoin is getting votes of confidence, from fintechs to Tesla and more.
DREAMSTIME
Bitcoin is either a massive bubble or the digital currency of the future.
The reality is likely somewhere in the middle. Either way, the cryptocurrency is working itself into the mainstream financial world, achieving the scale and critical mass that may make it increasingly difficult to dislodge or restrain.
With its market value hovering around $1 trillion, Bitcoin (BTC) has become too large and influential to remain on the financial fringes. Wall Street is pumping out reports on cryptos. Piper Sandler issued a 30-page report on Thursday, noting that the “crypto-economy could be entering a pivotal point in its development/lifecycle.”
Coinbase Global, the largest U.S. crypto exchange and custodian, says it plans to go public on April 14 in what may be the largest tech IPO since Facebook (ticker: FB) in 2012. Private valuations peg Coinbase at $68 billion. The firm custodies an estimated $90 billion in crypto assets on its platform. It had revenue of $1.3 billion in 2020 and profits of $322 million, according to a regulatory filing.
Fintechs see Bitcoin and other cryptos as a vast new market for payments and transaction services. Visa says it plans to settle transactions in a “stablecoin,” USD Coin (USDC). About $10 billion of USDC is now circulating, according to Visa, which sees it used for everything from buying a cup of coffee to cross-border payments, trade settlements, or foreign money transfers. Stablecoins are like digital dollars, pegged in value to the buck.
Other votes of confidence in Bitcoin are coming from Tesla (TSLA), PayPal Holdings (PYPL) and Square (SQ), all of which are now offering ways to transact in Bitcoin or other cryptos.
And there are expanding ways to invest, including derivatives, stocks and holding companies like the Grayscale Bitcoin Trust (GBTC). Fund sponsors are also angling to launch a U.S.-listed exchange-traded fund (catching up to Canada, where Bitcoin ETF s recently started trading).
U.S. fund sponsors filing for approvals recently include Fidelity Investments, VanEck, WisdomTree Investments (WETF), SkyBridge Capital, Valkyrie Digital Assets, and NYDIG Asset Management, according to Piper Sandler.
The Securities and Exchange Commission has so far declined to approve a Bitcoin ETF, citing concerns about volatility, price transparency, and market manipulation. However, the Biden Administration’s nominee for SEC chairman, Gary Gensler, may take a friendlier approach. Gensler previously ran the Commodity Futures Trading Commission and has studied cryptos extensively. “This is good news for the digital assets industry,” wrote Jeff Bandman, a former CFTC official in a post on CoinDesk.
As Bitcoin becomes entrenched, it may only get harder for regulators to restrain. Its growing acceptance as an alternative investment or transaction currency is far outpacing regulatory controls. That, in turn, could improve the investment case for owning it, according to Piper Sandler.
“Many investors view this scale as a safeguard against potentially overbearing regulations from governments in the developed world,” Piper says. Investing in Bitcoin, the firm adds, is a “quasi call option for both individuals and institutions on this new and potentially disruptive technology.”
Some economists also view Bitcoin’s rising clout as a means of keeping regulators at bay.
My read on the last six to 12 months is that as influential investors come in, it puts pressure on regulators not to do anything,” says Harvard economist Kenneth Rogoff, who doesn’t expect regulators to sit on their hands forever