With $5 trillion in cash waiting to enter the market, will Bitcoin usher in the “silver” age?

By Nancy, Shark

Many venture capitalists and macro investors believe that due to the recent rise in global gold prices, the price of Bitcoin will soon rise as well. According to Dan Tapeiro, co-founder of Gold Bullion International, there is currently about $4.6 trillion in cash waiting to be invested in precious metals and cryptocurrency markets.

Not only that, some investors also pointed out that Bitcoin in the next stage is likely to follow the development trend of silver twelve years ago. At the same time, institutional investors are also accelerating their entry. The new crown epidemic may be a catalyst for the development of the crypto market.

Nearly $5 Trillion Could Flow into Bitcoin Market

The turmoil in traditional financial markets around the world has also spilled over into the cryptocurrency market, as a result of the coronavirus outbreak and the growing depression in many industries. At the time of writing, Bitcoin was trading at $9,325.71, down 1.18% in the past 24 hours, with a market cap of nearly $171.7 billion, according to CoinMarketCap, while the total market valuation of all 5,000+ digital assets in the crypto industry remains low, at just over $250 billion. However, that may soon change. Dan Tepiro discussed a recent paper from market research firm Refinitiv Lipper, which found that there is currently nearly $5 trillion ($46,000, to be more specific) in money market accounts around the world, also known as liquid cash. Dan Tepiro believes that global cash flows have essentially reached an all-time high, so it is likely to flow into the gold and Bitcoin markets. Generally speaking, when the prices of stocks, securities, and common commodities plummet, liquid cash in the money markets moves to safe haven assets. He also tweeted a Wall Street Journal analysis (shown below), which clearly shows that investors are now sitting on more cash than ever before:

Historical records - Investors are now sitting on nearly $5 trillion in cash, but the biggest problem with holding cash is that the yield is basically close to zero, which also brings you huge opportunity costs for stocks, gold, and Bitcoin - but compared to gold and Bitcoin, people tend to have a huge negative/fearful mentality towards stocks, and due to the poor performance of traditional markets, investors' walls of worry are getting higher and higher every day. In fact, Dan Tepiro has been studying Bitcoin and gold for a long time and is very supportive of both assets. "Interestingly", Dan Tepiro's views have also been supported by many people in the crypto community. They basically believe that if the US dollar really plummets at some point in the future, then people will definitely explore other alternative and more advanced currencies and value storage methods, which makes sense. In addition to Dan Tepiro's bullishness on gold and Bitcoin, another analyst also expressed a positive attitude towards Bitcoin. He is the well-known cryptocurrency trader @Macnbtc. Macnbtc believes that the current value of Bitcoin is suppressed, just like silver in 2008, when its price had been suppressed for several years, and then finally ushered in an explosion, and the rise continued until 2012 (as shown in the figure below).

Macnbtc currently has 33,000 followers on Twitter. Recently, someone asked him how he viewed the suppressed silver price back then and whether it was comparable to the current Bitcoin. Macnbtc emphasized: "From a macro perspective, the current crypto market is bullish, which is undeniable. But under this market sentiment, we also need to remain calm. Unless Bitcoin closes above $10,100 every week or every month, I will confirm that the bull market has arrived."

Institutional funds accelerate layout

Many buyers with cash in hand are traditional institutional investors, and trading data also reflects their enthusiasm for increasing their investment in the crypto market during this special period. Data shows that in May, the total number of option contracts traded on CME was 5,986, 16 times more than in April. Futures contracts also soared 36%, with a total trading volume of 166,000. The number of BTC spot delivery of Bakkt Bitcoin futures contracts expiring in May increased by 22% from April. The contract expiring in May should deliver 143 BTC, and 117 BTC in April. According to a report by JPMorgan Chase, Bitcoin and other encrypted digital tokens have become a new asset class for institutional investment, and the current size of digital currency funds has reached US$7.11 billion. Behind the digital growth rate is the strong demand for encrypted assets by institutions. The entry of traditional institutions also provides a channel for more traditional investors to enter the market. Recently, after obtaining approval from German financial regulators, the London-based ETC Group will launch the Bitcoin ETP trading product "BTCE" on the high-liquidity market Xetra this month, and traders including the UK, Italy and Austria will be able to trade this new product. BTCE tracks the price of Bitcoin and is 100% backed by physical Bitcoin, which will be kept by digital asset cold storage custodian BitGo.

"The cryptocurrency industry has been hampered by concerns about complexity, accessibility and governance. With BTCE, we are bringing Bitcoin into the regulated mainstream financial market. Investors can trade and own Bitcoin through regulated securities, and they can also choose to redeem Bitcoin." Bradley Duke, CEO of ETC Group, commented on the news. Unlike ETFs, BTCE as an ETP is not subject to the Collective Investment Schemes Act (Cisa). But conceptually, the two are very similar to some extent. They both allow institutional investors and accredited retail investors to invest in digital assets as a type of fund without a custodian. The launch of BTCE will significantly reduce the participation risks of institutional investors and ordinary investors, and further enhance the popularity and liquidity of Bitcoin. The trading platform Xetra, where BTCE is launched, was established in 1997. It is the world's most liquid spot market fully electronic trading platform, with about 270 participating institutions and more than 5,000 traders from 18 countries and their financial centers. According to the 2019 spot bond market transaction statistics released by Deutsche Börse, the total order volume of all trading platforms under the Deutsche Börse Group was 109.4 billion euros in December 2019. Among them, the Xetra platform contributed 97.9 billion euros, with an average daily trading volume of 5.4 billion euros. This undoubtedly provides a strong source of vitality for BTCE products.

For traditional institutions, compliance is one of the most important factors in deciding whether to allocate crypto assets. But before that, investors have been eagerly waiting for the passage of Bitcoin ETFs because it is a compliant channel for institutional investors. And since buying ETFs does not mean holding real Bitcoin, investors do not have to worry about risks such as theft and hacker attacks. But the reality is that the U.S. Securities and Exchange Commission (SEC) has repeatedly rejected numerous Bitcoin ETF applications after receiving them. The SEC believes that Bitcoin ETFs have risks of market manipulation, liquidity risks, lack of global market supervision and sharing mechanisms, and information opacity. According to The Block, as of January this year, there were a total of 26 Bitcoin EFT applications, 12 of which have been rejected by the SEC, and the rest have been withdrawn by the issuers themselves.

For the crypto market, once the Bitcoin ETF is approved, it will further enhance the popularity and liquidity of Bitcoin, and greatly promote the transition of the entire crypto derivatives market from the edge to a more important one for the entire industry. However, Bitcoin ETF seems to be welcoming good news, and SEC Chairman Jay Clayton revealed that "we are closer to Bitcoin ETF."

However, the ETF that WisdomTree Trust applied for on June 16 may open a window for investing in Bitcoin. The ETF may invest up to 5% of its net assets in CME's Bitcoin futures contracts. If approved, the ETF, called the "WisdomTree Enhanced Commodity Strategy Fund," will invest the rest of its net assets in energy, industrial metals, precious metals and agricultural products, with Bitcoin accounting for a small portion. Traditional investment institutions, which have always been "reserved," are opening their hearts to emerging financial assets such as Bitcoin. Perhaps the COVID-19 pandemic will be a catalyst for traditional funds to enter the crypto world.

Source: PANews