Bitcoin threatens to dethrone US dollar as reserve asset

• Bitcoin becomes the third-most-popular asset among fund managers.
• The institutional interest in cryptocurrencies is set to grow in 2021.
• Bitwise success proves the popularity of digital assets among traditional players.

Buying Bitcoin is the third-most-famous trade among asset managers surveyed by Bank of America. The recent research conducted by the financial institution revealed that Wall Street’s interest in digital assets is growing, pushing the pioneer digital coin price to an all-time high. 

As FXStreet recently reported, many prominent investors and high-profile companies are looking into opportunities to capitalize on Bitcoin’s outsized price increase. Since the start of the year, the coin’s 170% gains made it one of the most profitable assets in the environment of rock-bottom interest rates. The success has not gone unnoticed by the traditional financial industry.

About 15% of fund managers, with assets worth $534 billion under management, mentioned that Bitcoin was a crowded trade, the survey conducted by the Bank of America between December 4 and December 10 revealed. Over half of the respondents bet on buying shares of hi-tech companies, 17% said that selling the US dollar was the most crowded trade.

The chart demonstrates a significant shift towards Bitcoin in December compared to November data amid the growing distrust in the US dollar.

Who’s behind the institutional crypto quest?

MicroStrategy Inc was among the first large corporations to invest in Bitcoin on the scale. The company amassed over 40,000 BTC on its accounts as a hedge against inflation and USD devaluation caused by Fed’s ultra-loose monetary policy. 

Square, Massachusetts Mutual Life Insurance and many other companies and individual investors like Paul Tudor Jones followed suit. Basically, they showed how to think about Bitcoin as a substitute for cash, Seth Ginns, a managing partner at a New York-based investment firm CoinFund noted on a webinar hosted by Evercore ISI on Tuesday. The expert says that this is just the beginning of the trend that will start rolling out for real during the next year.  

Multi-billion dollar management firm Ruffer is among the recent companies that joined Bitcoin investment fever. The Guernsey-based firm, with over £20 billion under management, bought BTC recently, according to the disclosure notice published by the London Stock Exchange.

Commenting on the purchase, the company pointed out that the move was primarily made to diversify from gold. Currently, Bitcoin’s exposure equals 2.5% of the total portfolio value. The investment is regarded as an insurance policy.

We see this as a small but potent insurance policy against the continuing devaluation of the world’s major currencies. Bitcoin diversifies the company’s (much larger) investments in gold and inflation-linked bonds, and acts as a hedge to some of the monetary and market risks that we see.

Bitwise 10 Crypto Index Fund has a roaring success

Bitwise Asset Management reported the successful launch of its crypto index fund. The Index listed on the over-the-counter (OTC) market OTCQX sold over 14 million shares during the first trading day. As of December 15, the share price settled at $81, while the trading volume reached $60 million.

Notably, the company says that it is the most highly-traded crypto fund in history. Bitwise 10 Crypto Index Fund launched on December 9 tracks the basket of 10 largest digital assets, including Bitcoin (75%) and Ethereum (13%). The other 12% is allocated across XRP, Litecoin, Chainlink, Tezos. 

Currently, the fund has $138 million worth of assets under management, while the capitalization of Its closest competitor, Grayscale Digital Large Cap Fund, exceeds $161 million.