Over the course of the year, we have already commented on Bitcoin in detail several times. We explained what exactly is the basis for its both short-term and long-term growth. Especially with the beginning of the fourth quarter, another important factor was added, which has so far received little attention.
Funds are moving towards long-term purchases
In 2020, dozens of investment and venture funds bought Bitcoin for the first time. So far, this has not led to huge changes in the market. However, these purchases have in any case led to an increase in the price of the first crypt currency.
The main bomb is as follows. By 2020, the funds that have invested in bitcoin will show a return on this instrument of 50%-200%, depending on the entry point. Their investors will be very satisfied with the managers.
Now let us imagine what investors in thousands of other, more conservative funds will do. They are watching bitcoin grow, about 70%-80% for the second year in a row. And at the end of this year, a lot of investors will ask their managers a question. And why don’t you invest in BTC? After all, there are funds that do this and these funds show huge returns for their investors.
If the manager says “we will not invest in BTC in 2021”, some investors will simply shrug their shoulders. They will then take the money from this fund and give it to another fund that invests in Bitcoin.
What should a manager do?
On the one hand, nobody forbids them to buy “a lot of Bitcoin” in 2021. But there is always the risk that this particular year will be bad for the first cryptocurrency. In this case, investors will again be extremely angry at the management of the fund.
That is why there is a solution that allows you to invest in BTC on the one hand. On the other hand, it is possible to bear extremely low risks. This is called the “1% rule”. If the fund’s assets are 5 billion dollars, then BTC will be bought for 50 million dollars (1%). Even if the bitcoin drops by half next year, the total assets of the fund will only drop by 0.5%. But if Bitcoin grows again, management, at the annual report to investors, will be sure to note that “our fund is extremely progressive, it invests in bitcoin and gets higher returns on this instrument”.
Perhaps 2021 will be the last year when some funds will not buy BTC as a matter of principle. In 2022, they will simply withdraw most of the money from such funds. What is 1% for funds? It is an amount of about $1 trillion, which is 4 times the current capitalisation of the first cryptocurrency.
What awaits us today?
01.30 Consumer price index in Australia for Q3
15.00 Bank of Canada interest rate decision
16.15 Press conference of the Bank of Canada
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