Bill Gates changed his attitude, Dan Bin bought Bitcoin, will Bitcoin become a mainstream financial asset?

I don’t own Bitcoin, nor am I bearish on Bitcoin.” “I’m already neutral on Bitcoin.”

Screenshot source: Twitter

Three years later, Microsoft co-founder Bill Gates once again talked about his views on cryptocurrencies such as Bitcoin on CNBC's Squawk Box, but now the billionaire's attitude has changed.

Three years ago in March 2018, on the same occasion, Bill Gates judged Bitcoin and other cryptocurrencies as "a pure 'greater fool theory' type of investment." He said: "I agree, if there is an easy way to short, I will short." In addition, he added that someone gave him some Bitcoin as a birthday gift, but he sold it a few years later.

As the times change, Bill Gates is not the only bigwig who has refreshed his views on Bitcoin and other cryptocurrencies. Other figures who have a significant influence on the business world, including Tesla founder Musk, BlackRock CEO Larry Fink, Bridgewater Fund founder Ray Dalio and Meituan founder Wang Xing, have all expressed new views in recent times.

Bitcoin, which was once only known to a small circle of geeks, is now entering the vision of a more mainstream and broader group.

Bitcoin skyrocketed, and the attitudes of well-known investors and institutions changed

The person who has been the subject of much discussion recently for his comments on Bitcoin and Dogecoin is Tesla founder Musk.

Earlier this month, Musk expressed his views on the American social media Clubhouse, saying, "Bitcoin is a good thing, so I am a supporter of Bitcoin." He also mentioned that he had a share of the Bitcoin transaction in 2013, and many of his friends have been trying to convince him to buy and sell Bitcoin for many years.

On February 8, Tesla disclosed that it had invested a total of $1.5 billion in Bitcoin, which accounted for 7.7% of Tesla's cash and cash equivalents. In response, Ronald Stephen Baron, a Tesla shareholder and manager of a US mutual fund, said that Tesla's investment in Bitcoin did not surprise him. He believed that investment in Bitcoin by business giants like Tesla would promote the large-scale popularization of Bitcoin.

According to the stereotype, asset management giants with huge scale will often enter the market of innovative assets such as Bitcoin only after the situation becomes clear, but from the actual situation, such prediction does not seem to be accurate.

On January 20 this year, two fund companies under BlackRock, the world's largest asset management company, submitted investment instructions to the US SEC. The instructions mentioned that some of its funds may participate in futures contract transactions based on Bitcoin.

Image source: BlackRock Funds V 497 Prospectus

BlackRock's major shift is not without precedent.

Last November, Rick Rieder, chief investment officer of BlackRock's global fixed income business, said on CNBC that "Bitcoin is likely to replace gold because it has more functions than gold." The following month, the company's CEO Larry Fink said in a panel discussion that Bitcoin may evolve into a global market asset, "These huge amounts of (funds) are moving every day... This is a weak market. Can it evolve into a global market? Maybe." Prior to this, he had repeatedly expressed indifference to Bitcoin.

In January this year, Ray Dalio, founder of Bridgewater Associates, wrote an article about his views on Bitcoin. In the article, he believed that Bitcoin was an amazing invention and that "the speed of its development is shocking. The whole process is like creating a traditional credit-based monetary system." He also believed that compared with existing wealth reserves in the market (such as gold), the development path of Bitcoin is worthy of attention.

On the evening of February 19, news that Dan Bin, chairman of Shenzhen Oriental Harbor Investment Management Co., Ltd. and author of "The Rose of Time", bought a Bitcoin ETF attracted attention. He publicly stated that he bought 1% of GBTC. "Although it's a bit late, I'll do it once I figure it out!" "As Tesla allows Bitcoin as a payment "currency", its value may be increased."

Screenshot source: Weibo

As more and more financial technology leaders pay attention to and make investments, Bitcoin is becoming an investment target for more people.

Can Bitcoin become a mainstream financial asset?

Bitcoin has long been dubbed "digital gold," and insiders often use the "digital gold" story to package it when preaching to the outside world. Statistically, Bitcoin does not seem to have much correlation with macro assets.

Image credits: Binance Research, Distributed Capital, Bloomberg

But from the actual market perspective, Bitcoin has not become an asset for large amounts of funds to seek safe havens, but like gold, commodities and other assets, it is a reflection of global liquidity preferences and market sentiment.

For example, on March 12, 2020, although the digital currency market did not undergo any significant changes, the continuous circuit breakers in the U.S. stock market led to the depletion of U.S. dollar liquidity, causing all assets in the market that were priced against the U.S. dollar to plummet that day, including Bitcoin. In addition, the leverage of derivatives in the cryptocurrency circle was too high, which led to the sudden plunge.

As prices are increasingly tied to commodities, Bitcoin's commodity attributes are becoming more prominent, so even if there is a relative lag in price, it will eventually be in sync with the entire financial market. In other words, the value of Bitcoin is not in hedging, it is similar to gold, and its value is based on its unique inaccessibility, but the latter's inaccessibility is reflected in physics, while Bitcoin is based on mathematics.

Unlike current financial products, Bitcoin is an asset based on global consensus, with high risks and the potential for high returns. According to CoinMarketCap, a crypto market data website, since January 1 this year, the price of Bitcoin has risen from $29,000 to nearly $52,000 today, an increase of nearly 80%, and its return performance is better than most investment targets.

Image source: CoinMarketCap

On February 16 this year, even Meituan CEO Wang Xing said on Fanfou that in theory, Satoshi Nakamoto is already the world's richest man. MicroStrategy, a listed company that began to increase its Bitcoin holdings several times last August, has now made nearly $2.5 billion in profits just from buying Bitcoin as Bitcoin continues to hit new historical highs.

While being widely reported by the media, the outside world often only sees the bright data, but often ignores the risks. On February 19, Musk also said that although the flow pattern of Bitcoin is more interesting than cash, buying Bitcoin is a "risky investment" for all S&P 500 companies. In addition, he added that when the real interest rate of legal currency is negative, smart people will look elsewhere; Bitcoin is almost as unreliable as legal currency.

In the current market, when bond yields are close to zero, most central banks in the world are trying to devalue their currencies. It is reasonable for investors to look for other assets to preserve value. If you have the idea of ​​investing in Bitcoin, you may be able to get some inspiration from Ray Dalio's views.

He believes that Bitcoin is like a long-term option with an unpredictable future, and that it can be invested in a certain amount, but the premise for such an operation is that "even if I lose 80%, it will not affect me much."

A large number of opinions agree that the current cryptocurrency market is already full of FOMO (Fear of missing out) emotions. It is understandable that crypto investors and investors in other markets who missed out on the $20,000 or $30,000 price of Bitcoin are worried about missing out on this bull market again.

Because on one hand, the prices of Bitcoin and Ethereum continue to hit new highs, and on the other hand, more listed companies and traditional financial capital are entering the market quickly. If there is no black swan event and the bull market continues, the price increase time of mainstream currencies in the later period may be shorter, but at the same time, it also means that the market risk has increased exponentially.

The cryptocurrency market is far riskier than the traditional stock market. It can experience an 80% increase in a single day, or a 90% plunge in a single day. It is more suitable for investors with high risk tolerance. For ordinary investors, do not blindly enter the market and go all in.