As the threat of a full-fledged coronavirus pandemic grows by the day, investors around the world are searching for viable hedges against the chaos. Gold has been a store of value for investors worldwide for thousands of years, but one executive thinks bitcoin is overtaking the precious yellow metal.
For Michael Sonnenshein, Grayscale Investments Managing Director, bitcoin has already managed to cement its role as a store of value. Sonnenshein believes institutional investors have been turning to bitcoin in recent months mostly because the coin resonates better with them in this new digital era, he noted in a recent interview with The Compound.
Bitcoin (BTC) Has Proven Itself As Digital Gold/ A Solid Store Of Value
Institutional investors have been adding bitcoin to their portfolios lately, and this was not the case a couple of months ago. “Bitcoin itself has solidified its role as a store of value or as digital gold,” Sonnenshein said.
The executive then added:
“So when I talk to an institution, they now look at bitcoin as the same flight to safety as they might look at bonds or gold or other things that have served in that capacity for them and that wasn’t a widely-held narrative probably until about the last 12 or 18 months.”
While some skeptics believe bitcoin cannot be a good store of value owing to its intrinsic volatility, he observed that in reality, many institutional investors are choosing bitcoin because it has similar attributes as gold. Sonnenshein further opined that some qualities actually make the OG crypto better than gold, case in point, its verifiable scarcity, portability, and divisibility.
Grayscale is a crypto asset management giant based in New York and currently manages 1.5% of all bitcoin in circulation. In other words, it controls bitcoin worth almost $3 billion. Notably, the firm’s bitcoin fund, known as Grayscale Bitcoin Investment Trust (GBTC) is purely invested in bitcoin and gives investors long-term exposure to BTC. Last year, GBTC was the second-most liquid fund and had the second-most traded volume on the OTC market.
Sonnenshein explained that the GBTC has attracted many institutional investors owing to the fact that it is transparent, fully-audited, has a track record of more than six years and it became an SEC reporting company earlier this year. This, according to him, shows that regulators are open to engagements with crypto leaders and they “are moving the needle forward on certain items.”
Other Cryptocurrencies, Meanwhile
Grayscale Investments currently manages 10 different crypto funds the likes of ethereum, XRP, Bitcoin Cash, and Litecoin. During the interview, Sonnenshein posited that with the growing demand in the asset class, legacy finance systems will have to accommodate cryptocurrencies if they want to remain competitive.
“There’s ever-growing evidence that this asset class is not going away; investors want access to it, and if the legacy institutions want to remain competitive, they’re going to have to open the door to this asset class for their clients.”
He did not dive deep into what roles other cryptocurrencies serve in investors’ portfolios whilst bitcoin acts as a hedging instrument. For Bitcoin Cash (BCH), however, he noted that it basically tries to solve some of bitcoin’s (BTC) shortcomings. “And over time, we don’t know who will be the winner,” Sonnenshein quipped.