Bitcoin has been featured recently in mainstream news, with many companies announcing they have invested in it or are considering doing so
February has been exciting for Bitcoin so far. It started the month at $33,000 and has since increased by over 55%, this week setting a new all time high above $52,000. There has been increased interest in the cryptocurrency, with searches of Bitcoin doubling in the second week of February, according to Google trend data.
With so many stories and opinions floating around at the moment it’s hard to know which to listen to, but if you want to be in the know, here are the most important pieces of Bitcoin news to drop this month and what effect they could have.
Tesla invested $1.5 billion into Bitcoin
Probably the most momentous piece of Bitcoin news this month was the revelation in an 8 February SEC filing that Elon Musk’s Tesla had purchased $1.5 billion worth of Bitcoin, which represents a whopping 7.7% allocation of its gross cash position.
This perhaps shouldn’t have come as too much of a surprise – Musk had already shown an openness to crypto, having asked Microstrategy CEO Michael Saylor whether it was possible to convert a large amount of the Tesla balance sheet to Bitcoin in a Twitter exchange last December. He also changed his Twitter bio to #bitcoin at the end of January, causing a rise in the price of the cryptocurrency.
As well as the Bitcoin purchase, the filing revealed that the electric car company expects to start accepting Bitcoin as a payment method in the near future.
Why Tesla’s investment could impact Bitcoin
- When the news broke, the price of Bitcoin surged by around 20% in 24 hours
- The traffic spike from the huge number of Bitcoin transactions that day caused some exchanges to experience technical difficulties
- As one of the largest companies in the world, Tesla could inspire other large companies to add Bitcoin to their balance sheets and establish digital assets as a cornerstone of a healthy, diversified treasury
- Tesla propelling Bitcoin into the mainstream news headlines and Elon Musk’s sway on social media could also hasten retail adoption
- As Tesla shareholders, JP Morgan, Goldman Sachs, Vanguard and BlackRock are now indirectly exposed to Bitcoin
- Tesla’s decision to accept Bitcoin as payment helps establish the financial infrastructure of the future and could shift the global financial paradigm towards fully embracing digitisation and decentralisation
A race to institutional Bitcoin adoption
After news of Tesla’s Bitcoin investment broke, Grayscale CEO Michael Sonnenshein reacted in a 10 February interview by saying, “I wouldn’t be surprised to see there being almost some sort of a race now,” in relation to institutional Bitcoin investment.
Tesla may accelerate the wave of institutional adoption but they certainly didn’t start it. Business intelligence software company MicroStrategy, and particularly its CEO Michael Saylor, has been trying to proselytise other corporations to the Bitcoin cause for some time.
At the start of February, MicroStrategy hosted the World.Now 2021 conference, which had the explicit goal of driving institutional adoption. More than 20,000 people registered for the event, with representatives from almost 7,000 different enterprises attending the Bitcoin for Corporations programme, and Saylor predicted an “avalanche of companies” would convert their balance sheets to Bitcoin in the next 12 months.
Why a wave of institutional adoption could impact Bitcoin
- MicroStrategy is planning to buy another $900 million of Bitcoin which would mean the company would hold almost 0.5% of all Bitcoin in circulation
- America’s oldest bank BNY Mellon last week formed a new digital assets unit to help clients with cryptocurrencies
- Investment management company BlackRock has “started to dabble” in Bitcoin according to its CIO
- A report last week suggested that Apple could generate a revenue of more than $40 billion from Bitcoin and other cryptocurrencies if it integrated them into its Wallet app
- Unlike Ethereum and some other cryptocurrencies, Bitcoin has a capped supply, and it’s this digital scarcity which attracts institutions and will result in a rise in price as adoption increases
- Recent research by Ark Invest suggests that if S&P 500 companies allocated just 1% of their cash to Bitcoin, the price of the cryptocurrency could increase by $40,000, while a 10% allocation could cause a rise of $400,000
Mastercard announced support for crypto payments
The payments giant confirmed it would be bringing crypto onto its network in a press release on 10 February. After analysing aggregated data, Mastercard found that many of its customers were using their cards to buy digital assets, as well as making use of crypto cards.
Although Mastercard has already created crypto cards in collaborations with BitPay, Wirex and LVL, these examples all involve Mastercard’s crypto partners converting digital assets to traditional currencies on their end before transmitting them to the Mastercard network; so this news represents the first instance of Mastercard supporting crypto directly.
Mastercard is currently in the process of deciding which cryptocurrencies to add, based on how well candidates meet its key needs of privacy, security, compliance and utility. The payments services provider also holds 89 blockchain patents and is working with major banks on launching central bank digital currencies (CBDCs).
Why Mastercard’s announcement could impact Bitcoin
- Soon, shoppers and merchants will be able to transact entirely in cryptocurrencies
- Mastercard’s huge presence in the payments industry could accelerate crypto acceptance by the rest of the traditional finance sector
- As digital assets become a more accepted part of everyday life, new adopters will most likely turn to Bitcoin first as the original cryptocurrency, before altcoins also receive a boost from the trickle down effect
- As Mastercard helps expedite the rollout of CBDCs, people may turn to decentralised Bitcoin to escape the system of state financial surveillance and control which CBDCs could herald
The first Bitcoin ETF is launched
After receiving approval from the Ontario Securities Commission on 11 February, the Purpose Bitcoin ETF began trading on the Toronto Stock Exchange on 18 February, making it the first direct custody Bitcoin ETF in the world.
An ETF, or exchange traded fund, is a basket of securities bought and sold on a stock exchange through a brokerage firm, which has grown into a leading global investment vehicle. The new ETF from Purpose is designed to provide investors with exposure to Bitcoin by investing directly in physically settled Bitcoin.
Purpose Investments will buy more Bitcoin proportionately to the quantity of purchased shares and is currently backed by 85.34569077 Bitcoin held in a cold storage wallet. The ETF is trading under the ticker symbols BTCC.B for Canadian denominated units and BTCC.U for US denominated units.
Why the new ETF could impact Bitcoin
- The Purpose Bitcoin ETF saw $145 million in volume on its first day of trading, according to Bloomberg Law
- A second Bitcoin ETF from Evolve Funds Group Inc has since been approved and will likely launch soon
- Multiple other investment firms have filed for Bitcoin ETFs and are currently awaiting approval
- Though there is yet to be a Bitcoin ETF on an American exchange, Bloomberg Intelligence’s Senior ETF Analyst, Eric Balchunas, believes that Canada’s approval is a “good sign” for a US sanctioned Bitcoin ETF, as the “US usually follows [Canada] shortly after”
- ETFs could encourage adoption by investors from more traditional finance backgrounds
The simplicity of Bitcoin exposure through existing trading apps without the technical hurdles of setting up a walleta or dealing with an exchange that might go down, could attract a whole new demographic of retail investors