The Breakdown - The CIO of $230B Guggenheim Just Called for $400,000 BTC

Episode Date: December 18, 2020

With so much focus on bitcoin’s record-setting price run, a number of huge (and hugely bullish) stories have gotten comparatively short shrift. In this episode, NLW looks at: Ruffer LLP’s $744 million bitcoin buy Hedge Funder Alan Howard and One River’s $1 billion digital assets bet Northern Trust getting into crypto custody Guggenheim Partners’ CIO calling for $400,000 BTC CoinDesk sister company Grayscale as the fastest-growing asset manager in history?  The Breakdown is produced and distributed by CoinDesk.com   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Alan Howard is an extremely well-known hedge funder. He's the founder of Brevin Howard Asset Management. Howard has quietly teamed up with Eric Peters, the CEO of One River Asset Management, to buy 600 million in crypto over the last few months unbeknownced to anyone. On top of that, One River Digital Asset Management has commitments that will bring its holdings of Bitcoin and ether to $1 billion early next year. Peters, the CEO of One River, said, this is the most interesting macro trade I've seen in my career. 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 crypto.com and nexo.io and produced and distributed by CoinDest. What's going on, guys? It is Thursday, December 17th, and my goodness. Yesterday, before Bitcoin started absolutely ripping, I had a whole show prepared on how Pornhub had gone crypto only, what it meant, et cetera. There is a lot there that I think is genuinely important. I think this story exemplifies the complicated role vis-a-vis freedom and power and questions of corporate power that are going to be so important to how the crypto industry develops. then yesterday happened. And my goodness, first of all, the price continues to rip. We got as high as

23,700 this morning before pulling back slightly to 23,200 when I'm recording. My dollar cost averaging is going to buy less than ever today, and I love it. The point is that there are so many bullish stories, even on top of just the price news, that I had to do one more day of just pure, shocked insanity. So with that in mind, let's start. dive in. First, let's give some more details about the deal that I mentioned yesterday with Ruffer. At the beginning of the week, news broke that a UK asset manager with more than $20 billion under management had made a Bitcoin investment. This was, of course, a continuation of the trend we've been seeing, the emergence of Bitcoin as a major player among institutions. This is the

narrative of the year for Bitcoin full stop. In the disclosure that Ruffer produced, they said, quote, Bitcoin diversifies the company's much larger investments in gold and inflation-linked bonds and acts as a hedge to some of the monetary and market risks that we see. So again, Bing, Bing, Bing, this is the narrative that is driving institutions into this space. They also indicated in that disclosure that they had allocated about 2.5% of their portfolio to Bitcoin. Initially, there was a lot of confusion about whether this was 2.5% of total assets under management or whether the 2.5% was referring specifically to a smaller $600 million exploratory fund within the group. And for about 24 hours, it seemed like it was that smaller allocation.

And still meaningful, right? 15 million is nothing to sneeze at, but it wasn't the big deal that everyone thought it was. But then the group confirmed that, in fact, it was the 2.5% of the entire assets under management. In fact, it was actually 2.7%. 550 million British pounds worth, which is about 744 million in US dollars. The significant thing here is, in fact, the size. With the mass mutual investment we talked about last week, it was the nature of the firm. A storied insurance agency might be a hugely influential group. It might be a catalyst for an entire new category of companies that represent a balance sheet

bigger than central banks to get into the space. With this, it's really about that. that $744 million allocation that shows the scale that some of these new players in the Bitcoin space are going to be playing at. Second, speaking of new players, Alan Howard has entered the field. So Alan Howard is an extremely well-known hedge funder. He's the founder of Brevin Howard Asset Management. He's well-known for volatility bets. Howard has quietly teamed up with Eric Peters, the CEO of One River Asset Management,

to buy 600 million in crypto over the last few months, unbeknownst to anyone. On top of that, One River Digital Asset Management has commitments that will bring its holdings of Bitcoin and Ether to $1 billion early next year. Peters, the CEO of One River, said, there is going to be a generational allocation to this new asset class. The flows have only just begun. Now, in terms of Howard's role, he's providing support services to the fund, as well as having taken a stake in one river. And guess who else is an investor? Yep, you got it. It's Ruffer LLP,

the company we were just talking about. This was executed extremely quietly so as not to cause a price spike and is just another one of these things going on in the background that we didn't know about until after. Peters said ultimately, COVID-19 provided the ultimate catalyst for the transition. This is the most interesting macro trade I've seen in my career. This is a lot of This episode is brought to you by Crypto.com, the Crypto super app that lets you buy, earn, and spend crypto all in one place and earn up to 8.5% per year on your Bitcoin. Download the Crypto.com app now to see the interest rates you could be earning on BTC and more than 20 other coins. Once in the app, you can apply for the Crypto.com metal card, which pays

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We're not done yet, though. Number three, let's talk about Northern Trust. And to talk about Northern Trust, we have to talk about scale. Northern Trust makes most of the companies we discuss on this show look absolutely minuscule. Northern Trust is a company with $13.1 trillion under custody and $1.3 trillion of assets under management. It's a 130-year-old firm that is basically about as big as they come. They are now teeming up with Standard Chartered Bank to launch Zodia, a new crypto custodian for institutional investors. I'm doing end-of-year episodes right now. We're going to be off for a couple weeks, but I wanted to have a full slate of shows, so I have some really great guests coming to tell you basically

what they thought about 2020 and what they think about 2021. One of those guests is Dan Tapiero, who many of you will know. He told me yesterday when we were recording that he actually thinks that the Northern Trust News might be the biggest news this year when it comes to institutional investments. Still going, though, not even close to Dunn. Let's talk about Guggenheim Partners' CIO on Bloomberg TV. Guggenheim manages about $230 billion. We talked about them having some crypto exposure a couple weeks ago. On Bloomberg TV, the CIO said, our fundamental work shows that Bitcoin should be worth around $400,000. This target is based around two things according to Minard, Scott Minard, the CIO, the asset scarcity and its relative value to gold as a percentage of GDP. He said,

Bitcoin has a lot of the attributes of gold and at the same time has an unusual value in terms of transactions. We also got more color around Guggenheim's investment. They started allocating when Bitcoin was around $10,000 a pop. I said it yesterday and I'll say it again, any one of these institutions who got in below 20K in a big way now looks brilliant. However, there is a note of caution that I want to share from Alex Kruger, who tweeted out, as institutional investors continue to enter Bitcoin, they will advertise their analysis signaling sky-high targets, driving further inflows in a pyramid-like fashion. That is how financial markets work. So important to note the gamesmanship of this sort of price targets, even though the number 400,000, is a little

eye-popping. Whatever the case, it's clear that these guys aren't alone. Let's take one of the surest indicators, the growth in the grayscale Bitcoin Trust. This is, of course, one of the only ways for investors to get Bitcoin exposure through their 401ks and other similar traditional instruments. And it has been absolutely ripping all year. In fact, we've noted before that they're buying more Bitcoin than miners are producing every day. The last six weeks, though, have been particularly spectacular. From $7.6 billion on November 1st to over $13 billion now. That is absolutely insane growth. In fact, Barry Silbert argued on Twitter that it's the fastest growing asset management business in history, and I certainly don't know of any possible

disagreement or counterpoint. We're still going, but let's just do a few more to wrap up this insane bullish news cycle. Amex took a stake in a new institutional trading platform called FalconX. Their head of Amex Ventures said, Amex Ventures invests in startups as a way to better understand emerging areas of the payments ecosystem. We are pleased to support FalconX as it continues to drive innovation in the digital asset space, including digital currencies. So this is a relatively small position from a corporate VC, but still worth noting, a bigger funding round comes from Paxos. Paxos has been recently probably best known for facilitating PayPal's crypto offering,

and it has just raised $142 million. That was led by Declaration Partners, which is backed by the family office of David Rubenstein's Carlisle Group. PayPal was also in the round, so that's a pretty significant war chest for Paxos to go out and compete. Finally, Coinbase was in the news because they've actually. added Mark Andresen and Kelly Kramer to their board of directors. Mark is Mark. You know Mark Andreson. You know Mark's role and reputation on Wall Street. Kramer is the head of financial at Cisco and on the board of Snowflank. And there's only one way to read this move. This is Coinbase

prepping for an IPO. So basically, there's just so much insane news happening that I had to give you one more of these wrap-up shows just to get through it all. It is just wild out there. It's exciting. yesterday, take a moment to be stoked, even if you're focused on what the next opportunities are, what you're going to do going into the new year, how you're going to think about this space, how you're going to brace yourself for a potential course correction, all of those things. Just take a moment because it is something right now. Anyways, guys, as always, I appreciate you listening. So until tomorrow, be safe and take care of each other.

Peace.