The Wealthy Are Jumping Into Bitcoin As Stigma Around Crypto Fades

With Bitcoin surging more than 270% since March, the rich are ratcheting up investments in digital currencies and anticipating further gains. The Wealthy Are Jumping Into Bitcoin As Stigma Around Crypto Fades

Christian Armbruester wishes he’d bought more.

Armbruester, the founder of Blu Family Office, a London-based investment firm for wealthy clients, dabbled in cryptocurrencies a few years ago. But the onetime investment banker, whose family made a fortune in metals and manufacturing, believes cryptocurrencies have earned a place in a diversified portfolio.

With Bitcoin surging more than 270% since its 12-month low in March, he’s ratcheting up his investments in the space and eyeing big gains.

“We’re now looking for trading opportunities in a very exciting field,” said Armbruester, who manages about $670 million for Blu Family Office, including his personal wealth.

Armbruester has plenty of company. Mexican media billionaire Ricardo Salinas Pliego recently tweeted that he’s invested 10% of his liquid assets in Bitcoin. Wall Street legends Stanley Druckenmiller, Paul Tudor Jones, and Bill Miller have endorsed buying it. After influential money manager Rick Rieder went on CNBC last month and said Bitcoin “is here to stay,” more than 874,000 viewers watched the clip on Twitter, attracting far more hits than his segments on Covid-19 or monetary policy.

“It tells us that Bitcoin has caught the attention and imagination of many people,” Larry Fink, chief executive officer of asset-management giant BlackRock Inc. and Rieder’s boss, during a virtual conference on Dec. 1. “But it’s still untested and a pretty small market relative to other markets.”

The last time Bitcoin skyrocketed in 2017, many wealthy investors largely stayed on the sidelines. The ersatz money was compared to the tulip mania during the Dutch Golden Age, and its utility as a money-laundering device in the digital underworld scared off many in mainstream finance.

Warren Buffett called Bitcoin a “mirage” and Jamie Dimon said it was a “fraud” (although he later expressed regret for that remark).

Since then, Bitcoin has yet to prove it will truly become a form of universal money accepted around the world. And many affluent investors such as Armbruester believe alternatives such as Ethereum may ultimately prove more valuable.

Moreover, cryptocurrencies are traded in an opaque market driven by rampant speculation and arcane technology rather than the easy-to-see fundamentals that drive stocks or bonds or commodities. And this week investors are getting a lesson in Bitcoin’s volatility, with the cryptocurrency skidding about 8.5% since Sunday.

Even so, affluent investors are giving Bitcoin a serious second look as it wins mainstream acceptance by influential players such as PayPal Holdings Inc. and Visa Inc., both of which are enabling account holders to use crypto. Miller is one of many traditional investors who’s noted that the stability of Bitcoin and its 12-year-old technology, blockchain, is bolstering confidence in its staying power.

Meantime, other investors are opting to back the new generation of database and financial software inspired by Bitcoin. “We have allocated to Blockchain and distributed-ledger technology-focused funds and companies recently, and we will continue to allocate more,” said Bobby Console-Verma, the founder of London-based technology firm, 1fs Wealth, who also manages money for his investment office.

Then there’s the moves by central banks and governments to flood economies with cash and drop interest rates to near zero to address the coronavirus pandemic. This massive wave of quantitative easing and fiscal stimulus, which shows signs of continuing next year, is also burnishing cryptocurrencies’ credibility as an alternative asset class.

“Normally in times of crisis people run to cash but who in their right mind wants to be cash-rich at a time when major economies are devaluing their currencies?” says Kevin Murcko, the founder and CEO of CoinMetro, a cryptocurrency exchange based in Estonia. “You could say that Covid-19, the U.S. election, Brexit, and, well, the entirety of 2020 have altered the way many in traditional finance view the value of digital assets.”

How long that may last is unknown. But analysts at JPMorgan Chase & Co. say investors have been withdrawing cash from gold funds at the same time Bitcoin is winning over more institutions.

The Grayscale Bitcoin Trust, a listed security popular with money managers, has seen inflows of almost $2 billion since October compared with outflows of $7 billion for exchange-traded funds backed by bullion, according to a JPMorgan report this week.

The analysts’ calculations suggest Bitcoin only accounts for 0.18% of family office assets, compared with 3.3% for gold ETFs. Tilting the needle from bullion to the cryptocurrency would represent the transfer of billions in cash.

“The adoption of Bitcoin by institutional investors has only begun,” wrote the analyst team led by Nikolaos Panigirtzoglou.

Tania Modic, a wealthy investor based in Lake Tahoe, Nevada, says she’s bought Bitcoin for years, partly as a “convenient store of value” free of the hassle and expense of handling and storing physical gold. Yet Modic says don’t discount the psychological and cultural forces driving the wealthy to warm up to crypto.

First, there’s FOMO, which is running high in the affluent circles she moves in. Then there’s all the young people who are scooping up crypto on Robinhood and other trading apps.

Bitcoin trading on eToro, a platform that’s popular with amateur investors in Europe and Asia, is running close to the boom in late 2017, according to the firm. Additionally, the number of women going into Bitcoin on the site has doubled compared with the last bull run.

“The big boys are putting their funds into Bitcoin as a hedge against being called Neanderthals who missed the crypto boat,” says Modic, the managing member of Western Investments Capital LLC, her investment family office. “And let’s not forget that they all have millennial kids or grandkids rooting them on.”

Institutions Are Bullish On Bitcoin, But Is Retail?

Charts and data from the last two weeks show retail traders have flipped bearish and the BTC buying has stopped.

The latest findings from Santiment, published in Cointelegraph Consulting’s biweekly newsletter, indicate that the combined balance of wallets holding small amounts of Bitcoin (BTC) continues to decline. This shows a downward trend in retail holders, which is in sharp contrast to the aggressive accumulation strategies of large holders.

Social media metrics reinforce what is being seen on-chain. The average mood toward Bitcoin has been declining consistently during the past two weeks, pointing to growing crowd weariness regarding the top coin’s near-term potential.

Another declining figure has been trading volume. Since its peak of $60 billion in November, Bitcoin trading volume has been decreasing, reaching just $29 billion on Dec. 9. With a decline in sentiment, retail interest and trading volume, many are skeptical that the new all-time high can be broken through.

However, it’s worth mentioning that bearish sentiment and lower retail interest are buy signals for those looking for evidence of room for growth. Both of Bitcoin’s major breakouts this year, in July and October, originated from a predominantly bearish sentiment.

Updated: 7-30-2021

Vontobel’s Wealthy Clients Are Interested In Crypto, Says CEO

The Swiss bank said some of the firm’s clients are allocating part of their portfolios to crypto.

Zeno Staub, CEO of Swiss private banking and investment management giant Vontobel, has revealed that some of the company’s wealthy clients have crypto exposure.

Speaking to Bloomberg on Tuesday, Staub stated that Vontobel’s clients have an interest in cryptocurrencies.

According to Staub, blockchain technology will have a profound impact on global finance. As part of the interview, the Vontobel CEO described the novel tech as the “Logic consequence of the general trend securitization because it is the only available technology that can create trust without a central counterparty.”

Commenting On The Bank’s Crypto Offerings For Wealthy Clients, Staub Stated:

“What we offer to our clients is that we’ve wrapped some cryptocurrencies in a secure, convenient and easy to handle way, and clients appreciate that and allocate part of their wealth to that.”

In its half-year financials published on Tuesday, the bank also reported significant interest for its Bitcoin (BTC) tracker certificate investment product. According to the report, the bank’s assets under management grew 11% in the first half of 2021, reaching an all-time high of 274.5 billion Swiss francs (about $300 billion).

Indeed, as previously reported by Cointelegraph, Vontobel is one of the pro-crypto banks in Switzerland. Back in 2016 and 2017, the bank was already creating Bitcoin-based investment products.

In January 2019, Vontobel also created a regulated crypto custody product for banks and asset managers.

Staub’s comments reinforce previous statements by other wealth management firms about the growing appetite for crypto exposure among their big-money clients.

Such is the extent of this growing interest that investment banks are becoming more incentivized to offer crypto investment products to their rich clients.

Earlier in July, JPMorgan announced plans to provide access to Grayscale’s Bitcoin trust to retail wealth clients.

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The Wealthy Are Jumping Into Bitcoin As Stigma Around Crypto Fades

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