Barry Silbert founder and chief executive of the Digital Currency Group and Grayscale Investments, made an appearance on Bloomberg at the end of a fretful week in crypto, and as expected is un-phased by the Bitstamp-induced correction, predicting this bull run won’t pop like in December 2017.
With bitcoin currently priced at $7,350, there’s every reason to be comforted by the fact that nothing goes up in a straight line, and a correction of sorts was expected by some observers, as EWN reported.
Silbert has seen it all before and is convinced that this bull run will not be derailed. More than that, he says that this time the bull run will be different, by which he means it will not be another bubble rippening for a pop.
How will it be different this time?
So how will it be different? First, he addressed the chart technicals.
“Sentiment, the technicals are great… 80% draw down in price happened what three of four times before. Every time that happens…. record highs. As soon as you get the price going back up animal instincts come back.”
But the really crucially consideration is how the lay of the land differs, and that comes down to infrastructure.
“The difference between this increase in price versus the bubble in 2017 is the infrastructure is much different. You have custodians now, compliance software, trading software. People are more educated about the asset class. This time it’s different,” says Silbert.
He also addressed the question of trust in the space, interjecting that he thought the ICO phenomenon was at the centre of those worries, and had helped power the bear market.
“All of the demand from ICOs went away. Projects were trying to stay in business and selling bitcoin.”
Drop gold, buy bitcoin
Grayscale Investments is doubling down on the notion that bitcoin is digital gold, as seen in the recent launch of a nation-wide US TV advertising campaign themed Drop Gold. The ad had been previewed a couple of weeks ago.
Indeed, Silbert partly credits the ad with helping to generate the buying fever behind the recent bitcoin mega rally.
Although the ad was previewed two weeks ago, the national campaign only started running t the end of this week.
Silbert makes no bones about the fact that they are targeting a new generation of investors who will soon be coming into the family inheritance and will be more susceptible to the pitch from the issuers of bitcoin financial instruments.
Ad hits the mark with a million views and counting…
It’s a hard-hitting ad. “The ad is designed to be provocative,” Silbert explains. “This has already gotten over a million views.”
“So what is the number one thing to break in terms of view points regarding getting gold bugs into bitcoin, he was asked.
The ad is basically aimed at getting into the heads of millennials. “It’s important to start the conversation… there’s a generational shift happening,” he contends. “Anyone who has a phone can access this new asset class”, unlike with unportable gold bullion, as the advert makes clear.
“For the younger generation, money is digital… $68 trillion in wealth being handed down over the next 25 years.”
“It’s not all going to go into bitcoin, but whatever is in gold is going to diversify into something else.”
But what about the solidity of gold built up over millennia, how can computer code compare?
“Where gold has history and cultural significance it lacks in utility. Bitcoin as a financial rail has the potential to be incredibly value from an intrinsic potential.
In fact, Silbert argues that “gold’s use and utility is going down”, pointing to its drop in use in electronics, which he says has fallen by 30%.
On who is buying gold he says: “It’s central banks buying. So basically, if you are buying gold you are betting on the central bankers, which is weird because gold bugs think that central bankers are idiots and don’t know monetary and fiscal policy.”
He continues: “So, there’s a real disconnect – so OK I’m going to be betting on the bankers doing the right thing yet they’re the ones who are buying gold right now.”
Silbert is not the only one talking about digital gold, with Tyler Winklevoss also weighing in, as the EWN report here shows.
The Digital Currency Group is probably the nearest thing that crypto has to a conglomerate, with its fingers in many pies.
Abra, Bitflyer, BitPesa, Circle, Chainalysis, Coinbase, CoinDesk, Decentraland, Etherscan, eToro, Grayscale, Korbit, Kraken, Ledger, Parity Protocol Labs, Ripple, Shapeshift, Xapo and Zcash, are just some of the companies DCG has a stake in, or owns outright.
So what about some numbers, hard data on the institutional side?
In the first quarter Grayscale Investments saw 70% of inflows coming in from institutional investors and family offices, Silbert reveals.
What was the money buying? According to Silbert “right now it’s just bitcoin”. He said 90% went into bitcoin.
What about the rest of the crypto field?
He was asked what investors are to make of the rest of the field.
Would it be a sea of many or just a few from the 2,000 and more crypto offerings available that would prove their worth.
Silbert said there will be:
“winners in particular use cases, for digital gold bitcoin, privacy will be very big use case, Zcash and Horizon, … we like Ethereum Classic (ETC) for smart contracts.”
Grayscale has been a long-term supporter of the old Ethereum chain that was left behind after the DAO hack forced a hard fork that was followed by majority mining nodes.
Ethereum Classic is not much used, and fell victim to a 51% attack as a result in January, so at this point would be a risky pick for executing smart contracts on.
In July last year Silbert revealed that DCG held five coins, and the choices, bitcoin aside, were surprising,
“So, we have 50% in Bitcoin, 25% in Ethereum Classic, 15% in Zcash, 5% in Decentraland, and our newest one is 5% in ZenCash,” he said at the time
Silbert reiterated that there are “going to be a handful of winners”, so let’s hope he’s changed and rebalanced the holdings in that portfolio of crypto from 10 months ago, for Grayscale investors’ sake.
And what to say about the proliferation and oversupply of tokens?
“The ICOs brought in a lot of capital… but there were some negative consequences.”
“More discipline and certainly more infrastructure came out of it,” he concludes.
He didn’t let the opportunity miss to remind his audience about Grayscale Bitcoin Trust is “the only publicly quoted bitcoin fund out there” The fund has assets under management of $1.5 billion and he thinks it “will be one of the first that gets approved”.
Although it has a year to date return of 132% it trades at a premium of 29%, above its net asset value, ie is priced 29% above the value of its underlying bitcoin holding. That makes it 29% more expensive than buying bitcoin directly.
SEC approved collective investment vehicles still look a long way off in the US. The SEC recently delaying again a decision on the Bitwise Bitcoin ETF, thought to be one of the strongest offerings so far in terms of addressing custody and price discovery issues.
The Grayscale Ethereum Classic Trust has done even better than its bitcoin cousin, with a year to date return of 212%, but trades at a hefty premium to NAV – this time an eye-watering ridiculous 200%.