If Institutions allocated just 1% to BTC, it would be worth $50k and have a market cap north of $1 Trillion

in #hive-1484419 days ago

What would happen if institutions took just a 1% allocation in bitcoin?

We have long awaited the arrival of institutions in a meaningful way.

We have seen recent data from Grayscale as well as the derivative markets volumes continue to explode which tells us that institutions are slowly making their way in.

https://hive.blog/hive-167922/@jrcornel/grayscale-fund-grew-by-12k-more-btc-than-was-created-this-week

But, what might it mean if we actually got endowments, foundations, family offices, sovereign wealth funds, pension funds, and mutual funds to all take a modest 1% allocation?

Similar to what Paul Tudor Jones was advocating...

Hint...

Very good things.

Lucky for us, our good friend Ryan Watkins, a research analyst at Messari, crunched the numbers for us...

According to him, this is what single digit allocations would look like in terms of money allocated to a bitcoin investment:

image.png

(Source: https://messari.io/article/when-the-institutional-investors-come)

That can be a little confusing to read for some, so here's the numbers before they were compressed to fit in the above chart...

image.png

Were you able to add all of that up?

If not, that's ok, I got the total here for you...

Added up, a 1% allocation would be equal to a little under $11 billion dollars in new money entering the bitcoin market.

That may not sound like that much when you consider that the bitcoin market is already worth $168 billion, so an influx of $11 billion doesn't even amount to 10% of our total market cap currently...

You are right, looking at it from that point of view, it's not a lot of money.

But wait Doc, you are telling me that the pinnacle of what we have been waiting for all these years would only amount to 8% or so of our current total market cap?!

Yes and no...

The total influx of money from those funds does amount to about 8% of our total current market cap, but the impact on the price would be astronomically more.

To really underscore this, there was research done by Chris Burniske back in 2017 that estimated how much fiat inflows could possibly inflate asset prices...

image.png

(Source: https://twitter.com/cburniske/status/910467908777672705)

*It's a pretty good thread and worth reading if you get some time^^^

The too long didn't read it version of the research was that the new capital coming in could raise asset prices anywhere from 2.5x to 25x the amount of new money coming in, depending on the inputs.

Which means...

On the conservative side, we could expect that an inflow of roughly 8% of the total market cap might increase the market cap by 20% or so.

And on the other end of the spectrum would be a 10% inflow increasing the total market cap by 250% or more...

Which is exactly why our good friend Mr. Watkins said that if institutions take just a 1% allocation in Bitcoin we could see bitcoin north of $50k with a total market cap of over $1 trillion dollars.

That sounds pretty dang swell to me, but what happens if instead of a 1% allocation, they decide to take a 2% allocation, or 3%?

I'll let you crunch the numbers on those scenarios...

Stay informed my friends.

-Doc

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Bitcoin, an unstoppable force? I guess so.

We certainly hope so...

From 2008 years still everybody looking for it when institutions allocate .50 percent to cryptocurrency 😆😅

Yep, pretty much. Though the volumes exploding on the CME bitcoin futures product and options, as well as increasing activity in the Grayscale product likely means they are actually arriving. Plus you know Paul Tudor Jones said he put a small allocation in bitcoin as insurance, similar to what the 1% allocation portfolio model is suggesting.

Nice, bitcoin reaching $50k is inevitable then...

Hopefully. The institutional uptake has been slower than expected but 2020 with all the drama has been a helpful year for BTC in terms of institutional adoption.

can't stop BITCOIN and Blockhcain. New investements will be coming soon.

Yes, hopefully.

The downside to having institutional money in the crypto markets is that it makes crypto more and more correlated with the traditional financial markets. As it is, we are seeing a dump when we should be getting ready for a moon shot on BTC.

Overall, it's a good thing in that it gives people options where to put their money. It expands the investment universe. However, if the same brains are running the cypto markets as the financial markets, we can't expect good things, long term.

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That is a very good point. Once the same algorithms that are running the stock market start running bitcoin and crypto they will be highly correlated. Perhaps that is why we have seen a major increase in correlation over the last 6 months, right around the time that institutions started to really pay attention to it... coincidence?

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