Shared from the 9/16/2020 Financial Review eEdition

Bitcoin emerges as a safe haven amid pandemic turmoil


Zerocap founders and principals (from left) Ryan McCall, Jon de Wet and Trent Barnes: offering investors ‘‘a bridge’’ between the worlds of traditional finance and the digital economy.


The world’s most famous “bitcoin billionaires”, brothers Tyler and Cameron Winklevoss, raised a few eyebrows when they recently argued that the digital currency was heading for a price of $US500,000 per bitcoin.

Writing on their Winklevoss Capital Management website, the internet entrepreneurs, venture capitalists and founders of the New York-based Gemini cryptocurrency exchange confidently asserted that bitcoin would take over from gold as the ultimate hedge against inflation.

Historically, investors have relied on gold as a store of value in times of turmoil. But the brothers believe that a consequence of the economic cataclysm unleashed by the coronavirus pandemic is that bitcoin will emerge as the global market’s leading safe-haven asset.

‘‘Bitcoin is ultimately the only long-term protection against inflation,’’ they wrote.

Warning of the cumulative impact of record government economic stimulus programs, rapidly rising global debt and the widespread adoption of quantitative easing (“printing money”) by central banks, the brothers concluded that “the spectre of inflation, or hyperinflation, is staring down on us”.

“Money stored in a bank will get run over. Money invested in assets like real estate or the stockmarket will keep pace. Money stored in gold or bitcoin will outrun the scourge. And money stored in bitcoin will run the fastest, overtaking gold,” the brothers predicted.

When the brothers’ analysis was published at the end of August, their ‘‘bull case scenario” was that bitcoin was undervalued by a multiple of 45, which translated to a price of $US500,000 per bitcoin unit. As it happens, the bitcoin price plunged soon afterwards, from around $US12,000 to $US10,400, but bitcoin advocates are unfazed.

Nigel Green, chief executive and founder of global financial advisory firm deVere Group, believes the case for bitcoin is stronger than ever, partly because of “record-shattering stimulus initiatives” by governments.

“Governments and central banks around the world are continuing to prop-up their economies,” he says. “The stimulus agendas are unsustainable in the longer term and there’s a potential inflation issue looming. Investors know this and are revising their portfolios accordingly.”

He believes investors will “pile into safe-haven assets not tied to any specific country”, such as bitcoin and gold.

Bitcoin, the original and dominant cryptocurrency, was launched in 2009 as a decentralised digital currency not owned by any one person, government or central bank. Although still controversial, it’s not just the true believers who see a bright future for bitcoin.

Billionaire US hedge fund manager Paul Tudor Jones, founder and CEO of Tudor Investment Corp, announced in a market outlook note to clients in May that he was buying bitcoin as a hedge against the widely predicted inflationary outbreak.

‘‘I am not an advocate of bitcoin ownership in isolation, but I do recognise its potential in a period when we have the most unorthodox economic policies in modern history,’’ Jones explained.

Melbourne-based Zerocap, a firm providing digital asset trading for private clients, family offices and institutions, believes sophisticated investors who once would have shunned cryptocurrencies are now showing interest.

Zerocap, started in 2017 by founding principals Jon de Wet, Ryan McCall and Trent Barnes, aims to provide investors with “a bridge between the traditional finance world and the new digital economy”.

“The cryptocurrency space has matured over the past decade and traditional investors are much more receptive to including digital assets in their investment portfolios but don’t necessarily know who to turn to secure an allocation,” says de Wet.

A leader in the cryptocurrency market, Zerocap’s clients are typically investing $50,000 and above.

“They will be investors with an investment portfolio that likely includes shares, property and gold, but they have most likely never invested in digital assets, bitcoin or otherwise. They have probably heard about bitcoin, but haven’t felt comfortable investing because it’s intimidating for someone new to the space,” de Wet says.

“As a digital asset wealth platform for private clients we help our clients diversify their investment portfolio with digital assets like bitcoin. We take a difficult to understand asset and make it safe and easy to invest.

“Our purpose as a business is that every investor should have bitcoin in their portfolio.”

Ryan McCall says the benefits of the Zerocap model include:

• An experienced team that understands traditional finance as well as digital assets.

• Local presence with a “high-touch, full-service” approach; offering personalised solutions and dealing directly with clients.

• Deep liquidity provides optimal pricing.

• Insured institutional-grade custody of digital assets.

• Global banking and settlement options.

• Opportunities for customers to generate additional yield on their holdings.

McCall believes there has never been a better time for investors to consider bitcoin.

“We are in a period of amazing change. Australia is entering its first recession in 30 years and debt is going through the roof. It’s the GFC times 10 and inflation is the key risk for investors,” he says.

“You haven’t missed the boat yet. Now is the time to ride the wave of change and invest in bitcoin. It’s the perfect hedge in the current environment and beyond.”

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