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NewBloc: Prospects for Bitcoin Value Investment in the Post-epidemic Era

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During the market panic caused by the new crown epidemic, the correlation between Bitcoin and gold has risen.

This article was written by Yuting, investment associate at New Bloc, graduate student in finance at Columbia University.

After the outbreak of the new crown epidemic, the global economy has fallen into a very unstable stage, and the central banks of various countries have also taken action. To revive the economy, although today’s news about vaccines has stimulated the market, the data situation is still not optimistic. After each crisis, it is also an important period for industrial restructuring and overtaking of emerging industries.

Bitcoin has a history of more than ten years since its birth, but it has a history of thousands of years Compared with gold, it is still an emerging target in a rising period.

The market performance of Bitcoin in 2020 is very strong, which has aroused strong market attention on Bitcoin many times, Whether Bitcoin will become Gold 2.0, or completely replace gold, remains to be seen.

Famous investor Paul Tudor Jones, calls Bitcoin “a great speculative tool” and believes that Bitcoin reminds him of gold in the 1970s. He once said that “every day Bitcoin survives, people’s trust in it will rise.” Currently, the value of Bitcoin held by Jones, About 2% of his fortune has paid him off significantly.

At the same time, former Goldman Sachs fund manager Raoul Pal Finally, he also transferred 25% of his investment portfolio to Bitcoin. People like Raoul Pal are increasing every day, and institutional attention to Bitcoin has reached unprecedented heights. 80% of institutional investors Sees an opportunity in crypto assets.

The post-epidemic era may benefit Bitcoin

In the post-epidemic era, Bitcoin will be favored by more investors and its price will rise. Several factors are driving Bitcoin to achieve this:

First, when evaluating Bitcoin investment products Demographic profiling is an important factor when looking at overall market opportunities. According to the sample survey, people with higher levels of education are more likely to accept the emergence of this emerging asset, and it is easier for them to understand the underlying principles and future development potential;

Compared with female investors, more men will dare to try to invest in Bitcoin, and young people are more willing to invest in Bitcoin than older people. While older investors currently hold more wealth than younger investors, younger investors will inherit a substantial amount of wealth from the older generation, so that $68 trillion will be passed from the 40s to the 60s over the next few decades , even to millennials. Millennials will invest five times as much by 2030.

According to the survey results mentioned above, young people are more likely to accept and invest in encryption than older people Currency, the wealth inherited from the older generation, will also be invested in some emerging assets such as Bitcoin, thereby pushing up the price of Bitcoin.

Source: Grayscale "Bitcoin Investor Research"

Second, the negative economic effect caused by the new crown epidemic has prompted investors to look for new safe havens.

In the context of shrinking GDP, economic slowdown, government bailouts and fiscal stimulus, emerging markets such as Bitcoin The asset is seen as a favorable hedge against inflation. In the past, whenever the global economy experienced a recession, the U.S. dollar would become a safe-haven asset for investors. However, the U.S. economy was severely affected by the epidemic. In order to restart the economy, the Federal Reserve announced interest rate cuts and unlimited quantitative easing.

According to the monetary policy data released by the Federal Reserve Open Market Committee (FOMC) in early November, the existing interest rate has reached zero ~0.25%, reaching a historical low, coupled with the US$700 billion quantitative easing policy, this water injection operation will lead to the continuous depreciation of the US dollar, making global investors reduce their investment confidence in the US dollar and turn their attention to emerging markets and emerging markets. Commodities etc.

This move will not only push up the price of emerging assets such as Bitcoin in the short term, but also in the long run Indirectly promote the outward development of the encrypted asset field, enhance investors' awareness of Bitcoin's hedging function and value consensus, and eventually make Bitcoin's volatility platform continue to rise.

Source: FRED

Third, in the face of the globalized economy, the growing conflict between international trade and unilateral trade, a distributed cross-border trade payment The system has become the core demand in some regions, and the blockchain technology behind Bitcoin is creating conditions for this demand.

At present, global trade settlement needs to be carried out through SWIFT, which is a clearing alliance formed by banks in various countries and regions , but its system and code are fully controlled by the CHIPS US dollar large-value clearing system in the United States, which means that the SWIFT international fund settlement system is a centralized alliance with the absolute right to speak in the United States.

During the economic sanctions launched by the United States against Iran in 2012, Iran was stopped from accessing the SWIFT international fund settlement system, allowing Countries cannot purchase Iranian crude oil through wire transfers, and can only rely on huge amounts of cash to purchase it. This undoubtedly cuts off the oil lifeline that Iran relies on for survival.

The Sino-US trade war is not over yet, China needs more financial innovations to deal with trade protectionism and The suppression of unilateral tradeism and the research on blockchain and Bitcoin will make more people pay attention to encrypted assets, thereby enhancing market confidence.

Bitcoin and gold have entered a watershed

Data from Grayscale Investment shows that starting this year, especially in the second quarter, some large institutional funds are flowing into its Bitcoin trust fund. From the first three quarters of digital asset investment reports released by Grayscale in 2020, it is not difficult to find that the scale of its assets under management has nearly doubled from US$2.2 billion in Q1 to US$4 billion in Q2, and reached 5.9 billion in Q3 Dollar.

Global large investment institutions are gradually turning their attention to encrypted assets, increasing their investment in emerging assets such as Bitcoin, The allocation proportion in its investment portfolio.

While institutions are aggressively entering the crypto asset market, billions of dollars in institutional money are flowing out of the gold market.

According to the analysis logic of correlation, when the correlation coefficient is 1, it means that the two are positively correlated, and the rise of gold price is also It will drive the price of Bitcoin to rise; when the correlation coefficient is -1, it means that the two are negatively correlated, and the rise in the price of gold will cause the price of Bitcoin to fall.

However, it is not difficult to find from the coefficient diagram in the figure below that the correlation coefficient between the two has begun to be at (-0.3 , 0.3), indicating that the correlation between the two is not strong, but starting from 2020, the correlation between the two is on the rise. Whether the changes in the two are a coincidence, or whether the assets have started to rotate, is still unknown.

However, this change deserves the attention of investors. When doing asset allocation in the future, it is necessary to consider whether to Allocate or more allocate crypto assets to your own portfolio.

Jean-Marc Bonnefous, former commodity hedge fund manager and now cryptocurrency investor: It really was a safe-haven asset in the past and baby boomers, and now gold is being replaced by crypto assets like bitcoin." During the market panic caused by the new crown epidemic, the correlation between bitcoin and gold rose. We believe this can further enhance Bitcoin's potential as "digital gold".

Source: Coin Metrics

Reference source

https://grayscale.co/wp-content/uploads/2020/10/Grayscale-2020-Bitcoin-Investor-Study.pdf

https://www.zhihu .com/question/430820641/answer/1582276292

https://www.odaily.com/search/%E6%9C%BA%E6%9E%84 %E6%8A%95%E8%B5%84

https://www.odaily.com/post/5153464

https://www.odaily.com/post/5154815

https://www.voosay.com/business/20597391911596083.html

https://grayscale.co /wp-content/uploads/2020/10/Grayscale-2020-Bitcoin-Investor-Study.pdf

About New Bloc

New Bloc, established at the end of 2017, is a financial service provider driven by data and artificial intelligence. The team consists of Graduated from the Chinese Academy of Sciences, Peking University, Oxford and other world-renowned university members, he has rich experience in academic research and business execution.

By exploring the laws of the encrypted asset market, New Bloc mainly provides customers with a one-stop block chain financial services. At present, New Bloc's main business is asset management, market-making services, and growth consulting. It has established the New Bloc Emerging Markets Hedge Fund, which includes four types of strategies: trend, factor, hedging, and arbitrage. On the basis of the original quantitative trading basic business, New Bloc began to expand subjective trading investment in 2020, and through intelligent portfolio optimization, it helps customers obtain the best unit portfolio income.

At the same time, New Bloc is also the first-line market maker of the top 3 encrypted exchanges in the world, with a daily trading volume of more than 150 million US dollars .