Weekly Roundup – Crypto Banks Coming | MassMutual’s BTC Buy | Crypto Funds’ Record Inflows

The breadth of crypto news this past week has been incredible, from Congress, to the world’s largest asset manager, to Wells Fargo including bitcoin in its investment report and MassMutual buying $100m bitcoin. Here’s our roundup of all the latest news and big reads.

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We are taking a short break from our news roundups over the next couple of weeks, returning on 4th January with our outlook for 2021. We wish you all a very happy holiday season.

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MicroStrategy Announces Completion of $650 Million Debt Offering to Fund Bitcoin Buys

MicroStrategy said last Friday that it had raised $650 million via a senior convertible note offering as part of its push for more financial dry powder with which to buy bitcoin.

The final figure is $100 million more than previously articulated in public statements, and $250 million more than when it first made the announcement.

As the firm noted in a release:

“The aggregate principal amount of the notes sold in the offering was $650 million, which includes notes issuable pursuant to an option to purchase, within a 13-day period beginning on, and including, the date on which the notes are first issued, up to an additional $100 million aggregate principal amount of the notes granted to the initial purchaser of the notes, which the initial purchaser exercised in full on December 9, 2020 and which additional purchase was also completed today.”

The move follows MicroStrategy’s $50 million purchase of bitcoin, with its currently known holdings now above 40,000 BTC.

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More Crypto Companies Apply for Bank Charters

Following Kraken and Avanti, at least two more companies in the crypto sphere want to be banks, with bitcoin payments startup BitPay venturing to create a national bank in Georgia and crypto services firm and stablecoin issuer Paxos filing paperwork to become a federally regulated U.S. bank.

BitPay’s proposed bank would be known as the BitPay National Trust Bank. Paxos, which is powering payments for PayPal’s cryptocurrency service, would operate its bank out of New York.

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New Institutional Player: MassMutual Joins the Bitcoin Club with $100 Million Purchase

Massachusetts Mutual Life Insurance Co. bought $100 million of bitcoin for its general investment account, the latest sign of mainstream acceptance. The insurance company, founded in 1851, said the bitcoin investment was based on a broad strategy to take advantage of new opportunities while remaining diversified, “giving us measured yet meaningful exposure to a growing economic aspect of our increasingly digital world.”

According to a report from The Wall Street Journal, the company purchased through New York-based fund management company NYDIG. MassMutual also reportedly bought a $5 million equity stake in the firm, which holds $2.3 billion in crypto. The purchase comes as major institutional players are adopting bitcoin for the first time and going longer on crypto investments.

instititutional buildings

Gold Sees $9.2 Billion Outflows, Crypto Funds Gain Record Inflows

Gold saw a record $9.2 billion outflows in the last 4 weeks as bitcoin funds gained $1.4 billion during the same period. Institutional investors poured approximately $430 million into cryptocurrency funds for the week ended 7th December.

According to a report published by CoinShares, the total crypto assets under management reached an all-time high of $15 billion, which is a significant jump from just $2.57 billion in 2019.

Gold could lose its shine in the long run due to institutional investors’ increased preference for bitcoin, according to investment banking giant JPMorgan.

“The adoption of bitcoin by institutional investors has only begun, while for gold its adoption by institutional investors is very advanced,” JPMorgan bank’s quantitative strategists and managing director, Nikolaos Panigirtzoglou, recently noted, according to Bloomberg.

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Bitcoin ‘Making Progress’ on Bid to Oust Dollar, Morgan Stanley Chief Global Strategist Says

Morgan Stanley Investment Management’s Chief Global Strategist Ruchir Sharma waxed bullish on bitcoin’s potential to usurp the U.S. dollar for payments in a Wednesday Financial Times op-ed.

“Today, most bitcoins are held as an investment, not used to pay bills, but that is changing,” Sharma wrote. He cited increasing BTC usage in small pockets of international trade and PayPal’s recent move to tap cryptocurrencies as a funding mechanism.

Considered in the context of falling faith in ever-growing dollar reserves, this trend could bode well for the market-leading cryptocurrency. Sharma argued that “bitcoin will gain” as its traditional competitors falter.

He cautioned the bitcoin bubble may yet burst. Even if it does, governments and their money printers should be shaken.

“Do not assume that your traditional currencies are the only stores of value, or mediums of exchange, that people will ever trust. Tech- savvy people are not likely to stop looking for alternatives until they find or invent one,” Sharma warned.

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Fidelity’s Bitcoin Custody Business has been ‘Incredibly Successful’ says CEO

In an interview with Barron’s last week, Fidelity Investments Chairman and CEO Abigail Johnson said that the firm’s bitcoin custody business has been “incredibly successful” and has a “tremendous pipeline.” 

She added that Fidelity is putting a lot of effort into connecting the legacy world with the future of digital currencies. “Building those on and off ramps around facilitating the trading between fiat currencies and cryptocurrencies is something that’s happening now, and I’m glad it’s moving along,”

Johnson personally finds the crypto industry “fascinating” and “super exciting,” she said in the interview. Noting rapid developments in the sector, she said distributed finance capabilities, such as Bitcoin’s Lightning Network, are “starting to become a reality.”

Overall, Johnson suggested that Fidelity’s crypto business is going on the right path. “We’ve got a lot of good momentum as a business, which is really exciting, and that’s really what I sought to achieve when we moved into [crypto], so I’m really happy about that,” she said.

Last week, Fidelity announced they have partnered with crypto lender BlockFi to custody pledged bitcoin. That means Fidelity’s clients can now commit their custodied bitcoin as collateral against USD loans financed by BlockFi. The service is aimed at giving Fidelity’s clients access to liquidity while holding their bitcoin.

Messari’s Crypto Thesis for 2021

Messari’s 2021 Crypto Thesis, written by founder Ryan Selkis, was published last week, calling out key trends in the space, along with predictions for 2021.

Highlights include the take on bitcoin: “The world’s top institutional money managers have finally taken public positions that make it socially acceptable for their colleagues to jump into the fray and buy BTC, the gateway drug to the rest of crypto,” and on Ethereum: “It’s hard to ignore five-year-old technologies that process more than $1 trillion in real value transfers per year, a figure that has already eclipsed PayPal’s.” On DeFi: “DeFi is justifiably hyped. The only thing I see slowing down the sector’s momentum would be precedent-setting (and maybe logic-bending) regulatory crackdowns of top market projects.I’m not betting on the regulators, though.”

Ryan’s interview with Pomp runs through his thesis in detail.

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