Kinjal Shah, a Senior Associate at San Francisco-based Blockchain Capital LLC, a VC and private equity firm that’s focused on the blockchain or distributed ledger technology (DLT) sector, notes that research shows that only around 34% of Americans still have a “fair amount of trust” in the US Federal Reserve.
Shah, a Quantitative Economics, Entrepreneurial Leadership Studies graduate from Tufts University, points out that the unemployment rate in the United States reached historic levels as the world’s largest economy has experienced serious challenges since March 2020, when awareness about the COVID-19 pandemic became more widespread.
Although the US economy is projected to grow next year, it will definitely be negatively affected due to the Coronavirus crisis. The Blockchain Capital team notes that COVID has disrupted the longest expansion of the US economy which had been growing steadily for the past 11 years and had been adding new jobs for 113 straight months.
The report from Blockchain Capital also mentions that since de-leveraging (crashing below $4,000 in March 2020), Bitcoin (BTC) has managed to outperform and decouple from equities and so-called “risk assets.”
The flagship cryptocurrency now appears to have become a more established asset class along with gold, US treasuries, investment-grade bonds, US equities, high-yield bonds, emerging markets, and various commodities, the report noted.
According to Blockchain Capital’s analysis, Bitcoin’s investment thesis has matured, “accelerating amid the COVID-19 outbreak.” The VC firm adds that the pandemic appears to have “initiated unprecedented macro policy” along with massive amounts of currency printing. This may have greatly increased the risks of more inflation in the foreseeable future, the report stated.
The Blockchain Capital team believes that the rise in geopolitical tensions could have made so-called censorship-resistant platforms like Bitcoin more appealing. Going on to comment on the many new on-ramps for digital assets, the firm noted that companies like PayPal (NASDAQ: PYPL) and Square (NYSE:SQ) along with Fintech firms such as Revolut have provided convenient ways for retail and institutional clients to gain exposure to Bitcoin and potentially other cryptocurrencies.
As reported, publicly listed firms such as business intelligence firm MicroStrategy has invested around $700 million into Bitcoin. The CME Bitcoin (BTC) futures and options have also reached all-time highs this year, the report confirmed.
The report revealed that the growth of crypto-native credit has also set an all-time high. This has led to market makers, funds, and traders being able to “seek out greater leverage with capital efficiencies,” the report stated. It added:
“Providers like Genesis are quickly growing their active loans, leading to tighter spreads, greater convenience and capital efficiencies. Although crypto credit markets are early, the growth supports the institutional acceleration of Bitcoin.”
The report also mentioned that in 2020, SoFi managed to acquire the NYBitLicense which has helped clear the way for crypto trading services. eToro also expanded its digital assets offerings with staking incentives and asset expansion. Digital bank Revolut has also turned on cryptocurrency services across the globe.
(You can access the full report here.)