December 2020 Market Commentary

December 2020 was another record-breaking  month for bitcoin and digital assets, perhaps one that will be remembered as definitive to the staying power of the asset class. Growth is happening in price, market share, and, most importantly, adoption as investors continue embrace the digitization of finance. Bitcoin finished the month up 49.24% with a closing price of $29,036.59 while the Bloomberg Galaxy Crypto Index (BGCI) measuring broader large cap assets rose 18.46% to a closing mark of 1051.10.

However, as I write this update, it is hard to ignore the feverish pace at which digital assets are moving in early January; bitcoin topped $40,000 and now hovers in the $35,000 range and the BGCI is wrapped around 1500. We are in uncharted territory with new highs and parabolic moves shaken off as the norm. This price action is spectacular, but we should focus on why it is happening and what is really defining this rally as we enter a new paradigm for the digital assets space.

December continued to build on the momentum of November’s clear arrival of “the herd”. We can define this rally with one word: institutional. As we look back on what happened in December and toward 2021, the repeated arrival of institutional capital will likely advance the current run further (with expected volatility along the way).

Here are recent developments supporting the institutionalization of digital assets:

Direct Investment

• MicroStrategy announced a $400mm convertible bond offering to buy bitcoin; the deal upsized to $550mm and closed at $650mm

• Insurance giant MassMutual announced a $100mm investment into bitcoin

• Asset manager One River disclosed a $600mm bitcoin purchase, committing to a $1bn position

• Ruffer, the $27bn UK-based hedge fund, disclosed a bitcoin position of nearly $750mm

Financial Sector

• JPMorgan estimated that a 1% allocation to bitcoin from pensions and insurance companies would require $600bn of buying

• Fidelity announced that it will hold bitcoin as collateral for cash loans

• Guggenheim CIO Scott Minerd indicated that bitcoin’s fundamental value could be $400,000

• JPMorgan said gold will suffer for years because of bitcoin and made a $146,000 long-term price prediction

• Jefferies strategists called for cuts to gold exposure in favor of bitcoin

• CME announced that Ethereum futures will launch in February

• Standard Chartered Bank launched crypto trading

• BBVA launched services for digital assets

• SBI acquired digital asset trading firm B2C2

• S&P Dow Jones announced its intention to provide indices for digital assets

• American Express invested in crypto trading platform Falcon X

Notable Happenings

• Coinbase filed an S-1, signaling its intention to go public

• Visa partnered with stablecoin USDC, enabling its 60 million merchants to use it

• Stablecoin Tether (USDT) attained a $20bn market cap

• Spotify signaled its intention to possibly accept digital asset payments

As we digest the current market prices against the backdrop of increasing institutional adoption, the 2021 outlook is one of optimism and growth for digital assets—and a new frontier for investors in digitized financial applications and networks.