Institutional investors are struggling, around thirty financial products are linked to the Toronto Stock Exchange, it has appeared in New York and its price has broken records. The year 2021 has undoubtedly been a landmark year for bitcoin and, in its wake, for the 8,000 or so cryptocurrencies that have appeared in the last decade. Will the bubble explode or transform the international financial system? Experts speak out.
1263 billion US
Total value of 18.7 million bitcoins in circulation when the currency peaked at US $ 67,553 on November 8. The value of all cryptocurrencies is estimated at 1.8 trillion US dollars. For example, Canada’s gross domestic product was US $ 1,643 billion in 2020.
36
Number of products available on the Toronto Stock Exchange related to cryptocurrencies, mainly the two most popular, bitcoin and ethereum. These include the world’s first exchange-traded funds, closed-end funds and actively managed funds.
1
In the United States, the first exchange-traded investment fund (ETF) appeared on the New York Stock Exchange last October, ProShares Bitcoin Strategy. It does not fully duplicate the value of the cryptocurrency, but rather is tied to futures contracts.
Mathematical stability
3iQ, a Toronto-based firm founded by Montrealers Jean-Luc Landry and Fred Pye, was the first in the world to launch a bitcoin-based closed-end fund in April 2020. It offers two bitcoin-based ETFs and l ‘ethereum since last spring. “It was a pivotal year,” summarizes François Dionne St-Arneault, Director of Products and Sales for Canada at 3iQ.
“At the point where the total value of the cryptocurrency is, you can’t ignore it anymore. ”
He believes that with the inconstant monetary policies of central banks linked to the pandemic, bitcoin, with its immutable mathematical mechanics, has paradoxically shown its relevance. “There is a lot of volatility, market vectors like a single Elon Musk tweet that has a lot of influence, but we realize that bitcoin is not influenced by government policies, him. ”
64%
Estimated proportion, in the first quarter of 2021, of cryptocurrency transactions attributed to institutional investors, according to the Coinbase platform. These would be behind 215 of the 335 billion US traded. The interest of these large institutional funds for cryptocurrencies, in particular the Caisse de depot et placement du Québec (CDPQ) which invested 400 million in last October, marked the year 2021, estimates Martin Lalonde, president and portfolio manager. at Rivemont.
PHOTO ROBERT SKINNER, PRESS ARCHIVES
Martin Lalonde, president and portfolio manager at Rivemont
“The big institutions follow the money. Their goal is to maximize return, they realized that the demand was there, and the obvious increase in the value of cryptocurrencies is attracting interest. ”
François Dionne St-Arneault, at 3iQ, has lost count of the webinars he gave this year to explain bitcoin and its derivatives to business leaders. “The year 2021 has truly been the year of the entry of more serious institutions into the world of bitcoin. In the United States, there isn’t a financial institution that doesn’t have its dedicated team for this asset class. ”
Companies
Microsoft, Home Depot, Starbucks, a fintech Canadian like Ledn who announced mortgages guaranteed by bitcoins in the fall: many companies agree to be paid in cryptocurrency. The most publicized of them, Tesla, announced it in early 2021 while revealing that it had acquired US 1.5 billion in bitcoins. Its CEO and founder, Elon Musk, however backed down the following May by suspending the possibility of acquiring a Tesla car with this virtual currency because of the greenhouse gas emissions associated with its “mining”.
Third wave
That said, the use of cryptocurrencies remains the exception in the classical economy. Most studies put the percentage of Canadians in cryptocurrency at around 5%, with bitcoin in the overwhelming majority of cases.
After early adopters and the interest of large institutions, “the third wave”, the one that would see massive adoption, has not really started, believes Voicu Valentir, president of the Cavaliro group, an investment firm in Laval .
PHOTO ALAIN ROBERGE, PRESS ARCHIVES
Voicu Valentir, president of the Cavaliro group, Laval investment firm
With the growing popularity of these decentralized virtual currencies that escape the tax authorities as long as they do not enter the traditional economy, he sees another trend emerging: regulation. The Biden administration in the United States has multiplied the signs of concern about bitcoin in 2021, seeing it in particular as a tool for financing crime.
“Imagine that Bombardier decides to pay its employees in bitcoins, directly on their anonymous private key, gives Mr. Valentir as an example. The government is going to say, “Hey, I want the names, tell me who you pay.” ”
What is bitcoin?
This electronic money was artificially created by a group of computer scientists under the pseudonym Satoshi Nakamoto in 2009. By convention, the number of bitcoins issued is halved every four years; it is currently 6.25 bitcoins every 10 minutes given to “minors” whose computers manage exchanges. Technically, all bitcoins, or 21 million, will finally be issued in 2140. The registry, on the other hand, requires more and more resources to be managed. This scarcity and ever-increasing computing power were intended to model the behavior of bitcoin on that of commodities like gold. Its value in traditional currency, which fluctuates widely, depends mainly on supply and demand. For a manager like Martin Lalonde, caution is in order, even if the returns are attractive. “Most of our clients will put a small percentage of their investments in cryptocurrency. Enough to make the needle move when things go up, but not too much so as not to jeopardize its heritage. ”