US financial bailout adds to Bitcoin’s strength​​​​​​​

Slowly and steadily, the USA is creeping towards an ultimatum with cryptocurrency. And unlike 2017, when so many people lost money in the FOMO, retail-led “bullrun”, this time it appears a lot more professional and dare I say it - sustainable. More and more institutional, corporate and high net worth entrants are piling in and in essence, sticking up two fingers to the US dollar.

Jim Duffy

It is no secret that Michael Saylor of Nasdaq listed MicroStrategy is the Bitcoin poster boy of 2021. Saylor has converted his cash holdings and company treasury policy into Bitcoin. Not only has he taken his hard earned $500 million and bought Bitcoin with it. He went out to the markets and brought in another $650 million at a ridiculously low interest rate and immediately stuck this into the world’s leading crypto coin. The “bet” or strategy has paid off so far as his share price rocketed with major investors buying. And as the price of Bitcoin goes up, he keeps on buying. Now we have a new entrant to the market.

Nevada based, Nasdaq listed, crypto mining company Marathon Patent Group this week reported that it has also invested $150 million in Bitcoin as a reserve asset on its balance sheet. Announcing its move, Marathon stated that it has purchased 4,812 Bitcoin at an average price of $31,168. To put this into perspective, the price of Bitcoin two months ago was $15,000. Marathon is now invested in Bitcoin as well as mining or producing it via its core activities. Of course, this is a very small sum in the grand scheme of things, but it could just be the start of a snowball rolling down a steep hill.

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As a Bitcoin pioneer, Michael Saylor has now put in motion a C-Suite webinar for CEO’s and CFO’s across America. In February, Saylor and a whole cast of quality speakers will present a full day on Bitcoin, why he is in and how they can replicate what he did. The initial take up of his invite is staggering. It is reported that up to 2,000 business participants have signed up. The interest in adopting Bitcoin or simply copying Saylor is tangible. Not just from big listed companies, but from smaller businesses who want to protect the purchasing power of their cash. Cash that is decreasing in value as the dollar gets diluted by President Biden and his new Treasury Secretary, Janet Yellen.

Remember that guy called Donald Trump? Well, he borrowed about $8 trillion to buttress the US economy. Not all for the better of the average Joe in the street mind you. Trump’s tax breaks for the rich will cost the USA over $2 billion in years to come. But, he did inject stimulus and provide some cover for hard working and out of work Americans. The new guy and his “banker” will make Donald Trump look stingy. It is estimated that Biden will borrow three times what Trump did to fight Covid-19, boost the lagging economy and look after the poor. And in doing so, weaken the strength of the dollar while, while driving companies like Marathon into hedging against it via Bitcoin. Now, we can see why Michael Saylor’s offer of a Bitcoin playbook is so appealing.

Of course, not all attending will make the jump into Bitcoin. Some will go the full hog, while others might dip a toe in and commit 5%-10% of their cash into this new “hard” money. But, while this is happening even bigger players are rumoured to be positioning their chess pieces so that they do not get blocked from this new tsunami of interest that is building up. The “wall of money” heading into cryptocurrency is only just building up steam it seems. This presents problems.

Secretary Yellen is in a very tough position. She simply has to get more money into the hands of poorer Americans. This will mean borrowing or “money printing” in the short to medium term. Doing so thus creates the ideal context for Saylor and his Bitcoin crusaders. But, with Covid-19 wrecking global economies unless America gets “free” money via the government, it is a double edged sword for Yellen. The more she borrows from the Fed to keeping the economy oiled, the more the dollar gets devalued, the more capital flight to Bitcoin.

I do hope the Scottish Government is watching closely. Time to appoint a crypto tsar to keep us at the races? Happy to help out….

Jim Duffy, MBE, Create Special