If you recall, it was around this time a few years ago, 2017, when Bitcoin became a household name and went on the tear from under $1,000 per coin to more than $17,000 per coin in under one year. The mania of the move came in the latter part of the year and right between the holidays. Fast forward a few years later, and Bitcoin has once again made a surprising move in the latter half of the year and once again set all-new record highs.
I have long been bearish on Bitcoin, but over the years and recent months, I have begun to move more toward the middle in terms of Bitcoin bulls vs. bears and why I have moved towards the middle what I would like to explain today.
My biggest and main issue with Bitcoin from the time I was introduced to it in 2013 is that, like other precious metals, they have no real intrinsic value. Therefore, you can’t accurately or even inaccurately value the asset. With that being said, I have never invested in gold, or diamonds, silver, or any other metal, unless you are like my wife and consider “jewelry” an investment. I don’t invest in any of them because they aren’t like stocks that have value based on what the company plans to do or how much cash they have in the bank. I can value stocks and determine if they are under or overvalued by the market.
Precious metals, like Bitcoin, you can not do that because these things are only worth what they last traded for or what one person or another somewhere in the world is willing to pay for them at this moment in time.
And none of that has changed.
However, in the past few months, we have seen a few significant developments that have indicated the financial investment world, not the Winklevoss twins or the random guy you know who trades on Robinhood. Still, the real players in the financial world are beginning to accept Bitcoin as an investment.
A few months ago, I wrote about how Square (SQ) purchased $50 million in Bitcoins. In their recent earnings statement, they indicated their Bitcoin revenue hit $1.63 billion and $32 million in Bitcoin gross profit during the third quarter on its Cash App. In all of 2019, Square had on $516 million in Bitcoin revenue. Square is embracing the Bitcoin movement and profiting from it.
But perhaps Square and Jack Dorsey aren’t really what you would consider a major financial player. How about VanEck? The New York-based investment management company has over $50 billion in assets under management. The company recently listed a Bitcoin Exchange-Traded Note on the Frankfurt, Germany based trading venue. The ticker is VBTC, and it goes by the name the VanEck Vectors Bitcoin ETN.
VanEck has been one company that has attempted to open a Bitcoin Exchange Traded Fund in the US but has never been given permission to do so by the SEC. The ETN currently trading in Europe owns Bitcoin, and therefore the ETN is “physically” backed by the asset. This gives investors essentially direct access to Bitcoin without dealing with the still complicated methods of owning the cryptocurrency.
Unfortunately, it may still be difficult for US investors to buy the VBTC ETN, but most of them could still buy the Grayscale Bitcoin Trust (GBTC) if they wanted a different method of owning Bitcoin than directly doing so.
But, why does the move by Square, its earnings report, and the opening of the new Bitcoin ETN matter? Well, because the SQ earnings report shows that people are using Bitcoin on a massive scale. It shows that companies like SQ can also make money, allowing others to use Bitcoin. This should open more doors for other companies if they think there is a market for Bitcoin and a way for them to profit from accepting Bitcoin.
Square investing in Bitcoin means that a major player in the financial world is willing to put its money where its mouth is and tell company stock investors, like me since I own shares of SQ, that buying Bitcoin now is a better investment for you than us giving you a dividend or reinvesting that money into our business so we can grow faster.
And finally, now that the VanEck ETN is trading in Germany, this signals a turning point because the German regulators allowed this ETN to open and start trading. This also gives other agencies around the world, like the SEC, here in the US, a model to look at and determine if they want to allow these funds in the US. The more funds that can buy Bitcoin, the stronger the currency will get, and the more stable it will become since large blocks of it will be owned and likely held, not traded. The more larges funds involved in it, the more stability it will have in the long run.
Now I am still not running out and buying Bitcoin, as I believe there are better investments today, but I am no longer the Bitcoin bear I once was.
Disclosure: This contributor held long positions in Apple, Tesla, Intel, Google, Amazon.com, Facebook, Priceline and Microsoft at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.