The numbers are clear: In a direct comparison, cryptocurrencies have made all other assets look old and boring in recent years.
To be honest to god, there are many good reasons to stay away from any cryptocurrency. It's a risky, sometimes very risky investment.
But more and more well-known brands are entering the cryptocurrency market.Even traditional investors who otherwise buy stocks, bonds, funds or derivatives are taking notice of kinds of different coins and cryptos.
We've seen a big push in the U.S. in particular over the past year. This year is shaping up to be the start of major institutional interest in Bitcoin.
Today, let's look at where Bitcoin and Wall Street are converging.
1) Insurance companies, Asset and Investments companies and Banks
Massachusetts Mutual Life Insurance - an almost 170-year-old insurance company - has become the latest institution to invest in Bitcoin. The financial services company just took up a $100 million position in the digital asset.
JP Morgan meanwhile issues its own price target on Bitcoin, which is more than $140,000.
Goldman Sachs has also apparently changed its mind and is preparing to enter the market. Even some hedge fund gurus are in.
Fidelity Investments; one of America's largest asset managers itself and a very well-known name.
The firm started building its own bitcoin wing years ago and so far offers bitcoin investments for particularly well-heeled clients.
Even Blackrock's CIO stated in an interview, that bitcoin could replace gold as a store of value.
A thesis that is normally only been heard from hardcore Bitcoin fans.
The fact that Blackrock, the world's largest asset manager, has revised its previously negative opinion of Bitcoin and wants to enter the market is interpreted by many as a sign to finanally enter the crypto market directly or inderectly.
2) MicroStrategy
In August 2020, MicroStrategy invested $250 million in Bitcoin as a treasury reserve asset, citing declining returns from cash, a weakening dollar and other global macroeconomic factors. The company made several additional large purchases of Bitcoin later in the year; in total the company spent $1.125 billion on nearly 70,500 Bitcoin in 2020 at an average purchase price of about $15,964 per Bitcoin.
The stock of the tech company - which provides enterprise software - exploded as a result - because it's an opportunity to invest indirectly in Bitcoin. Tech entrepreneur Michael J. Saylor is the main driver behind this strategy.
3) PayPal
The interest and support of payment service provider PayPal has not only given Bitcoin a boost - but also the companies' stocks.
202 markets and more than 305 million active, registered accounts worldwide use PayPal.
October 2020, PayPal announced a new service allowing customers to use cryptocurrencies to shop at 26 million merchants on the network starting in 2021. As part of the announcement, PayPal secured the first conditional cryptocurrency license from the New York State Department of Financial Services, which will allow customers to purchase cryptocurrencies such as Bitcoin, Litecoin, Ethereum, and Bitcoin Cash.
PayPal benefits twice. Selling coins to customers is a new business model. The user base of Bitcoin & co. is increased, which tends to drive the price - and in turn increases the value of the company, which lifts the share price. Add to that the fact that many fund managers, who are subject to strict rules, are looking for another indirect way to invest in Bitcoin.
4) Grayscale Bitcoin Trust
Among the biggest regular buyers of bitcoin is the Grayscale Bitcoin Trust. The name says it all, it is basically a fund that buys bitcoin - and investors can buy shares in the fund. You can compare it to a bitcoin ETF, but those who buy from Grayscale pay handsomely.
In November 2020 it recorded a milestone: for the first time since its launch seven years ago, the investment product has more than 500,000 Bitcoins in assets. Fees are high and the fund trades well above the actual bitcoin price because demand is so high. The fund's investment volume has exploded from about 2 billion to more than 20 billion dollars in the year 2020. To satisfy investor interest, Grayscale has to buy up more and more bitcoin.
Warning voices continue - not only on Wall Street
But it has to be said out loud: There are still a lot of voices warning against all cryptocurrencies and still not taking it seriously as an asset class.
Often the analysts in the banks contradict each other.
Also, both the new U.S. Treasury Secretary Janet Yellen and the ECB chief Christine Lagarde have recently spoken critically about Bitcoin and warned against money laundering.
