Bitcoin Breaks $20,000: Institutional Adoption and the Cyberpunk Moment for the Dollar
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Bitcoin Breaks $20,000: Institutional Adoption and the Cyberpunk Moment for the Dollar
Bitcoin has become an angel in the eyes of some, while simultaneously a contemptible devil in the eyes of others.
Navigating Web3 tides with focused insightsOn December 16, a historic moment arrived as Bitcoin's price broke through $20,000, setting a new all-time high.
From its March lows to today, Bitcoin has surged over 450%, with a market capitalization approaching $400 billion—surpassing Johnson & Johnson—and ranking 14th among global listed companies by market cap.
Euphoria, disbelief, confusion, curiosity, scorn... Bitcoin has become an angel in the eyes of some, and a contemptible devil in the eyes of others.
What propelled Bitcoin beyond its previous highs? Where did this momentum come from?
The Cyberpunk Moment of the Dollar
"The primary driver behind Bitcoin’s rise is the macroeconomic environment, which created the perfect conditions for its takeoff," said Meltem Demirors, Chief Strategy Officer at CoinShares.
The macroeconomic environment refers to central banks around the world printing money frantically to rescue economies paralyzed by the pandemic—monetary easing on a scale far exceeding anything seen in the past century.
Morgan Stanley estimates that the balance sheets of the G4 central banks (the Federal Reserve, European Central Bank, Bank of Japan, and Bank of England) will expand to nearly $30 trillion by the end of next year.
Among these, the Federal Reserve's balance sheet has expanded most rapidly, accounting for two-thirds of total global central bank expansion. Statistics show that 21% of all U.S. dollars ever created were printed in 2020 alone.
The most direct impact of monetary easing is dollar depreciation.
The U.S. Dollar Index has fallen 12.46% from its March peak and 8% since the beginning of the year.
Under the dual forces of the pandemic and massive dollar liquidity injection, the world has entered a cyberpunk era—one resembling the scenes in *Cyberpunk 2077*, where skyscrapers and neon lights coexist with slums and sewage ditches.
Disease, unemployment, factory shutdowns, high-interest loans, bankruptcy—the pandemic erased years of hard-earned income for many lower-income Americans in an instant.
Meanwhile, stock markets soared, IPOs doubled on listing day at record rates, and the wealth of billionaires who own real estate and financial assets continued to climb.
A report jointly released by UBS and PwC revealed that during the height of the crisis—from April to July—billionaires reaped enormous profits.
Global billionaire wealth surged by 30%, surpassing $10 trillion for the first time, well above the previous peak of $8.9 trillion in 2017.
The number of global billionaires reached a new high. The U.S. remains the country with the most billionaires. Mainland China saw its billionaire count rise to 415, a record high, with total wealth increasing by 41%.
In this age of rampant monetary flooding, to avoid continuous depreciation of dollars in their wallets, all money is desperately seeking outlets—causing every kind of asset to skyrocket.
In the U.S. stock market, a financial狂欢 unfolds. The stock market has never been a barometer of the economy—it’s a barometer of money.
The Nasdaq index keeps hitting new highs. Tesla rose over 644% year-to-date, with a market cap exceeding $600 billion; NIO surged over 1011% year-to-date, nearly 50 times from its March low, surpassing BMW in market value.
Beyond tech stocks, Bitcoin—as an emerging supranational asset—has also gained favor among wealthy individuals and institutional investors.
As a non-sovereign, fixed-supply, bearer asset, Bitcoin stands in opposition to existing fiat currencies and credit systems. It requires no trust in any institution, resists control, and is immune to interference by states or organizations.
The collapse of trust in the current system is a key reason for strengthened confidence in Bitcoin. Especially amid the ongoing devaluation of the dollar, Bitcoin has become a receptacle for dollars—a store of value often referred to as “digital gold.”
On December 15, Bank of America/Merrill Lynch’s monthly "Global Fund Manager Survey" revealed that the top three most crowded trades were: long tech stocks, short the U.S. dollar, and long Bitcoin.
Institutional Adoption
Where did the strongest buying power behind Bitcoin’s rally this year come from?
Looking back, institutional capital from the United States emerged as the main driving force.
On December 11, according to *The Wall Street Journal*, Massachusetts Mutual Life Insurance Company (MassMutual), one of the top five life insurers in the U.S., purchased $100 million worth of Bitcoin for its general investment account through New York Digital Investment Group (NYDIG).
Another aggressive public company is MicroStrategy.
Previously, MicroStrategy primarily provided business intelligence (BI) software to enterprises, with unremarkable performance—reporting a $1 million loss in 2019.
Starting in July, MicroStrategy began aggressively purchasing Bitcoin. Through multiple consecutive buys, it spent nearly all its cash reserves—$475 million—for 40,824 BTC, now valued at $869 million, yielding nearly $400 million in unrealized gains, exceeding its total profits over the past five years.
MicroStrategy’s CEO wasn’t satisfied. On December 10, the company announced plans to issue $550 million in convertible bonds, using the net proceeds to buy more Bitcoin—in simple terms, after running out of bullets, MicroStrategy started borrowing money to buy Bitcoin.
Explaining the bold bet on Bitcoin, MicroStrategy CEO Michael Saylor said, “Zero interest rates, open monetary taps, and impending inflation will erode the dollar. Holding large amounts of dollars is imprudent under current conditions.”
In his view, Bitcoin is the best store of value—far superior to gold or stocks.
Driven by investment performance, MicroStrategy’s stock price climbed steadily—from a March low of $90 to a high of $358, an almost 300% gain—even though it reported a $10.18 million loss in Q3 2020.
However, Citibank analysts downgraded MicroStrategy stock to “sell,” advising clients to exit positions due to the company’s “excessive focus” on Bitcoin, which exposes investors to significant risk, along with substantial insider selling by management.
According to sources at JPMorgan, President Phong Lee sold nearly all of his shares.
Regardless, public companies have become an undeniable force among major Bitcoin holders.
According to Bitcoin Treasuries data, over 16 public companies now hold Bitcoin.
Besides MicroStrategy, there's Square, the payment company owned by Twitter CEO Jack Dorsey, which holds 4,709 BTC. Jack Dorsey himself is a staunch Bitcoin supporter, even listing Bitcoin as a hashtag in his Twitter bio.
Grayscale: The Open Whale
Beyond publicly known companies, numerous mysterious billionaires and institutions operate beneath the surface—many of them investing in Bitcoin through Grayscale Investments, which has become the most prominent open whale in Bitcoin’s 2020 rally.
Grayscale itself is a trust company that earns fees by issuing Bitcoin trust products like GBTC.
As of December 17, Grayscale’s Bitcoin Trust held 569,261 BTC—up over 61% from 351,754 BTC just six months earlier on May 21.
In its mechanism, investors can contribute either cash or actual BTC. When investors deposit Bitcoin into Grayscale, the coins are stored with custodian Coinbase Custody, and Grayscale issues equivalent shares of the Bitcoin Trust (GBTC) in return.
The clever part: due to regulatory constraints, GBTC shares cannot be redeemed. Investors seeking profit must sell their shares on the OTCQX market. Because GBTC is one of the few legal and compliant channels to invest in Bitcoin, strong demand causes GBTC to frequently trade at a premium of around 20% above its net asset value.
The growing holdings of Bitcoin in Grayscale’s trust create strong buying pressure while reducing sell-side pressure in the spot market—shifting that pressure to the U.S. stock market and fueling upward momentum.
According to Grayscale’s Q3 2020 disclosures, 81% of buyers were institutional investors, followed by accredited investors and family offices (each 8%). Notably, 57% of buyers came from outside the United States.
Grayscale’s GBTC shareholder list includes major institutions such as Rothschild Investment Corp and ARK Invest, managed by Cathie Wood, the famed “female Buffett” and tech investor.
While Grayscale provides institutional investors with a compliant way to buy Bitcoin, PayPal opened the floodgates for retail participation.
On October 21, PayPal announced it would launch cryptocurrency payment services, citing growing interest from central banks and consumers during the pandemic. Users can now buy, hold, and sell cryptocurrencies via their PayPal accounts and use them at approximately 26 million merchants worldwide.
According to Pantera Capital, a blockchain hedge fund, most of the daily newly minted Bitcoin supply is being absorbed by customers of online payment giants like PayPal and Square.
Thus, amid the backdrop of dollar liquidity expansion, with institutions aggressively buying and retail investors gradually joining, Bitcoin broke through $20,000 to reach a new all-time high.
*TechFlow reminds all investors to beware of the risks associated with chasing high prices. The views expressed herein do not constitute any investment advice.
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