‘Coming To 34 Million Accounts’

After Monday’s wipeout, crypto prices turn mixed.

Over the past week, the bitcoin price soared 4.9%, at one point hitting a high of just over $22,500. Most major altcoins are recovering too. Ethereum’s price jumped a few percentage points, CardanoADA
ADA
is up 0.8%, SolanaSOL
SOL
rose 4.8%. XRPXRP
XRP
and dogecoin are up 2.5%, 0.1% while shiba inu and BNBBNB
down 1.5% and 1.4%.

Meanwhile, rumor has it bitcoin will soon take yet another step to mainstream adoption.

People familiar with the matter told Wall Street Journal that Fidelity, the world’s fourth largest asset manager overseeing $4.3 trillion in assets, is planning to let individual investors trade bitcoin.

This Monday, Mike Novogratz, CEO of Galaxy Holdings, one of Fidelity’s first crypto clients, said at a conference: “A bird told me that Fidelity, a little bird in my ear, is going to shift their retail customers into crypto soon enough.”

If the gossip comes to pass, it will mark Fidelity’s final step toward “mainstreamizing” bitcoin as an asset class to its massive 84 million investor base.

During the Covid crypto boom, Fidelity was one of the first asset managers to launch a private crypto fund for accredited investors. Then earlier this year, Fidelity was the first institution to add bitcoin to 401ks.

And now bitcoin is coming to its 34 million brokerage accounts.

Zooming out

What does Fidelity’s vote of confidence mean for bitcoin?

After more than a decade of being bullied as a Ponzi scheme, or as Warren Buffet called it, “rat poison squared,” bitcoin is finally carving itself out a place in portfolios as a legit alternative asset class.

The key here is alternative.

As I argued last year (and accurately predicted a bitcoin rally to near $70,000), bitcoin isn’t competing with traditional assets. And contrary to its original promise, it stands no chance of replacing fiat currencies—or CBDCs for that matter. Instead, it’s competing with insurance against traditional assets.

That is, gold.

Think about it. There’s about $11 trillion worth of this yellow metal stuff sitting in central bank reserves and investor portfolios. Retail investors alone have parked ~$2.5 trillion in this asset class. And over time, their holdings just keep on growing.

That’s because gold has just one job, and it does it very well. That is, sit tight in a vault and hold its value against traditional assets.

But gold is almost a relic at this point. It’s inconvenient to transfer, it has a high carry cost, and is otherwise impractical in the increasingly digitized and automated financial world.

This is where bitcoin comes in.

Looking ahead

Can bitcoin replace gold?

Its obvious allure is technological superiority—there’s no question about it. You are comparing an immutable store of value built on blockchain technology with a mere metal dug up from the ground here.

Bitcoin’s weak spot is that it’s still on a roller coaster. And for a store of value, 12 years and one recession are just baby steps compared to gold’s 5,000-year track record. That said, each institutional win — like adding it to 401ks —brings it closer and closer to an inflection point.

What would happen if bitcoin replaced gold? According to JPMorgan’s estimates, bitcoin’s price could pass $150,000 in the long run, only if it matched gold’s private investments (excluding central bank reserves and institutional investments.)

But what if bitcoin becomes a reserve asset? These are the questions that will actually drive bitcoin in the long run.

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