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This week in Bitcoin price: Jan 19-25

Another week of major volatility saw prices dip below the $30,000 mark for the first time since January 1 before beginning to regain some of their decline. Also this week: reports from JP Morgan and Standard & Poor’s (S&P) highlighted both the risks and potential of Bitcoin as a new asset class; Marathon Patent Group joined a growing array of publicly-traded companies to invest in the cryptocurrency; and U.S. Treasury secretary nominee Janet Yellen gave clues about the Biden administration’s potential perspective on crypto regulation. All that and more in the latest edition of our weekly report. 

Published on January 25, 2020

The big picture

Finance giants that had long been skeptical of Bitcoin are continuing to warm to the cryptocurrency. This week, BlackRock — the world’s largest asset manager, with more than $7 trillion under management — announced that two of its funds would be able to trade Bitcoin futures. Chief investment officer Rick Rieder noted that  “[Bitcoin is] going to be part of the asset suite for investors for a long time." 

Key points

  • Janet Yellen, nominee for U.S. Treasury secretary and former chair of the Federal Reserve, provided written testimony about the risks and potential of crypto: “Bitcoin and other digital and cryptocurrencies are providing financial transactions around the globe. Like many technological developments, this offers potential benefits for the U.S. and our allies." Yellen added: “I think we need to look closely at how to encourage their use for legitimate activities while curtailing their use for malign and illegal activities.”

  • An S&P research report compared Bitcoin to gold: "While both are scarce, gold does not yet have a ceiling to supply, while there ultimately can only be 21 million Bitcoins mined." Further, S&P suggests that as Bitcoin becomes mainstream, concerns about issues like Bitcoin theft are fading.

  • JP Morgan analysts suggested that as Bitcoin becomes more mainstream, its potential value as an uncorrelated asset may decline. (An “uncorrelated asset” is one that doesn’t rise and fall alongside other major markets. Such assets might have added value because they allow investors to “beat the market.”) Still, the report notes that Bitcoin and other cryptocurrencies could remain a strong hedge: “[They might] uniquely protect portfolios against a simultaneous loss of faith in a country's currency and its payments system, because they are produced and they circulate outside conventional and regulated channels."

  • Publicly traded company Marathon Patent Group announced on Monday that it bought $150 million worth of Bitcoin for its corporate treasury. Marathon Patent Group joins publicly traded companies including Square and MicroStrategy in replacing cash with Bitcoin on their corporate balance sheet. Said CEO Merrick Okamato, “[We] believe that holding part of our treasury reserves in Bitcoin will be a better long-term strategy than holding U.S. dollars.”

Spotlight: Is a U.S. Bitcoin ETF finally on the horizon?

Crypto investors have long hoped that the Securities and Exchange Commision would allow the creation of an Exchange Traded Fund, or ETF, around Bitcoin. Such a fund would allow investors exposure to Bitcoin without having to hold it directly, and shares could be bought and sold throughout the day via traditional brokers. 

According to Fortune, some investors see President Biden’s choice of Gary Gensler — former Commodities and Futures Trading Commission chair and “MIT academic with a reputation for crypto-savviness” — as a positive sign for a Bitcoin ETF. 

Meanwhile, an opinion piece in Bloomberg (Five Reasons Why the SEC Should Approve a Bitcoin ETF) pointed out that crypto ETFs have performed well in Europe and there are ETFs for other volatile asset categories. The piece also noted that a Bitcoin ETF could be simpler for investors to understand than holding crypto directly (as it wouldn’t require the understanding of concepts like private keys).

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