The Breakdown - 22% of Goldman Sachs Wealthiest Clients Think Bitcoin Will Reach $100,000+ in 12 Months

Starting point is 00:00:05 Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexo.io and Casper and produced and distributed by CoinDes. What's going on, guys? It is Saturday, March 6th, and that means it's time for the weekly recap. First of all, this week, let's discuss the macro environment. I'm continuing to see debates on Twitter about whether Bitcoin's sideways slash down price this week had to do with larger macro volatility or that was just a convenient narrative. So what's going on in the larger markets is basically that the stock market is making a bet

Starting point is 00:00:51 that the improving economy is going to force the Fed to let rates rise and eventually taper off their asset buying program as well, which is going to ultimately put downward pressure on stock prices. Ben Carlson put the irony perfectly in a tweet saying, last year, why is the stock market rising when the economy is getting worse? This year, why is the stock market falling when the economy is getting better? Either way, as my show on Thursday was all about, this has brought up a ton of questions around Bitcoin correlation.

Starting point is 00:01:23 If you didn't happen to listen, my basic thesis is that stocks correlation to Bitcoin has more to do with the fact that stocks have taken on a store of value safe haven role in the context of forever suppressed interest rates than it does with Bitcoin's risk asset nature. If we're talking about short-term correlation, however, I do think that given how much of the upward price pressure has come from institutional allocation mandates,

Starting point is 00:01:49 it could make sense that in the short term some of the buying pressure could have been put on pause in the context of larger resets. Frankly, there could even be some profit-taking for institutions that got in around 20K-25K. inevitably, I think that when there are actors who don't have a strictly Bitcoin-only mandate, what's happening in other parts of their portfolio will have some connection to Bitcoin. But it doesn't necessarily have that much to do with people making a specific macro analysis

Starting point is 00:02:19 vis-a-vis Bitcoin as much as it being a byproduct and externality of their larger trading strategy. Ultimately, however, we're just going to have to keep watching this correlation with the macro to really understand where Bitcoin fits in a larger picture, how uncorrelated it is, versus now part of a larger superstructure. Next up, let's check in on NFTs. So one more TLDR on my show from earlier this week, because as with anything that is not perfectly critical or perfectly embracing, that middle space tends to piss people off, my argument was that NFTs are a potentially truly disruptive force in terms of artistic

Starting point is 00:02:56 business models. The thing that interests me is the way that they allow a true market from the smallest actors to the biggest pockets around artists to actually form. And what I mean by that is that traditionally artists haven't had a really easy ability to capture people who would want to spend $500 or $1,000 or $2,000 on their art versus people who on the one hand just want to buy a ticket or on the other hand want to give them some crazy patronage grant. There's probably a big space of, call it lower upper class supporters for artists and musicians. that could be tapped in a different way, so perhaps NFTs create an opportunity for that. I didn't talk about any use cases beyond the creative because that's where so much of the attention and energy is right now. My concern, and in fact, the only area that I found it really commensurate with ICOs was the prices. I worry that too much of the price discovery going on right now

Starting point is 00:03:48 is going to be warped by speculators who know that crypto hype leads to money. That's not an indictment of anything happening, and frankly, I'm not a traitor nor thinking about market timing. Friggin' Gary Vee is bringing the Kool-Aid man into Clubhouse to talk about NFTs, so it's likely more BS money piles in before it leaves. Now, one interesting thing this week that I saw that was somewhat controversial was Banksy getting rolled up into the game. A group called Burnt Banksy took a 2006 print titled Morons that was purchased for $33,000 at Christie's in December.

Starting point is 00:04:22 The print was a commentary on people by the game. art and even had the line, I can't believe you morons actually buy this shit. Well, the group made an NFT and then burnt the original. Here was their statement. If you were to have the NFT and the physical piece, the value would be primarily in the physical piece. By removing the physical piece from existence and only having the NFT, we can ensure that the NFT, due to the smart contractability of the blockchain, will ensure that no one can alter the piece and it is the true piece that exists in the world. By doing this, the value of the physical piece will then be moved onto the NFT. This was, as you imagine, because they burnt an expensive piece of art, very controversial,

Starting point is 00:05:02 with a lot of the mainstream art press calling it dumb. Frankly, even though Banksy wasn't himself associated with it, it feels like the type of thing that would be pretty on brand for him. Meanwhile, Banksy himself just painted a jailbreak from Reading Prison on the wall of Reading Prison, so it seems to me like he's got bigger things going on. Looking for the best way to unlock your crypto's liquidity? Nexo.io is exactly what you need. Borrow against your digital assets at just 5.9% APR, earn passive income with yields of up to 12%,

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Starting point is 00:06:22 Finally, let's circle back to institutional adoption and close the loop on the other point from the beginning of the show. It's always healthy on a week where there has been some sort of big pullback in price or just stop momentum to zoom out again. And this is especially true when the supposed culprit is slow-moving actors like institutions. So let's go look at the other institutional news from the week. J.P. Morgan held a macro quantitative conference on Thursday. It featured 3,400 investors across 1,500 institutions, and they were surveyed about their thoughts on cryptocurrency. Here's the way the block summed it up. They said cryptocurrency's reputation is shifting to greater legitimacy, but the coin hasn't lost

Starting point is 00:07:02 its risky and crime-related perception. So of these people surveyed, a tenth of the firms say they have invested in crypto. Of those who haven't, 22% say they're likely to do so, while 78% said they were not. 58% of participants believe that crypto is here to stay, and 7% said that it will become one of the most important assets. On the other hand, 21% said it's a temporary fad, and 14% said it's rat poison squared. The fact that twice as many people said rat poison squared has said it was likely to become one of the most important assets likely gives you a sense of who might have been at this conference. Of course, actions speak louder than words, so let's look over at some reports around actions. The block is reporting that Charles Schwab, a $6.8 trillion asset firm, is in the process of

Starting point is 00:07:50 considering several different firms with whom it can partner to offer white label services around crypto brokerage and trading. This would be another huge entrant into that market, and it makes sense given that basically all of its competitors are also trying to race to get in this game. As I've said multiple times on this show, the race to be the white label provider for these traditional financial institutions to offer crypto services is going to be one of the big behind-the-scenes business battles of 2021. And then there was a very different survey. Goldman Sachs conducted a survey of clients, and these were the biggies. Pensions and sovereign wealth funds, macro funds, hedge funds, banks, and insurance made up the majority of the respondents, of which there

Starting point is 00:08:34 were 280. Of those 280 respondents across all of those categories, 40% have crypto exposure. And what's more, 61% expect their digital asset holdings to increase in the next 12 to 24 months. So what's driving the action? Well, 28% said the most important factor was a broader market thesis, i.e. this macro backdrop that we talk about all the time, while 57% says it was positive news, such as institutional offerings. It's not hard to see how those two things work in tandem. Macro backdrop drives conviction among a smaller number of people who drive that institutional offering, while the follow-on see that institutional offering and say, hey, whether I have that macro thesis or not, there's something there that I need to be paying attention to.

Starting point is 00:09:17 Now, what about their thoughts on the future? Fifty-four percent predict a price of $40k to $1,000,000,000 100K in the next 12 months. 54% predict a price of 40,000 to 100,000 12 months from now, while 22% think Bitcoin will be over 100,000 in 12 months. Think about that. Pensions, macro funds, sovereign wealth funds, hedge funds, banks, and insurance companies. Of the respondents, 22%, more than a fifth, think Bitcoin will be over 100,000 more than 2x from where it is today in 12 months.

Starting point is 00:09:49 34% said that regulation and internal mandates are the, their greatest hurdle to start investing. Now, one little interesting nugget, they were asked which assets are most interesting to them. 42% responded Bitcoin, but 29% responded ETH, so perhaps there is more institutional interest in ETH and D-Fi than we're seeing in the popular narrative. All in all, perhaps a mixed week in the short-term for institutional exposure, but very clearly along a trend line. And this is the point that I wanted to make. Any time there are short-term blips along this journey, you have to zoom out and see whether the long-term trajectory is still positive. When it comes to institutions, it's absolutely undeniable that it is. And don't forget,

Starting point is 00:10:31 before we leave, just as I was putting the finishing touches on this, Michael Saylor announced that Micro Strategy had gobbled another dip, buying $10 million more of Bitcoin, about 205 coins at 48,88 per. If you sell your Bitcoin, Michael Saylor will buy it. Anyways, guys, I hope you're having a great weekend. Until tomorrow, be safe and take care of each other. Peace.

The Breakdown - 22% of Goldman Sachs Wealthiest Clients Think Bitcoin Will Reach $100,000+ in 12 Months

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