We forecasted 5 months ago in our 5 Must-Read Cryptocurrency Predictions For 2019 that this would be the year in which institutional money would start flowing into the cryptocurrency market. We are just 6 weeks into 2019, and the first such case is confirmed. Two separate pension funds invest collectively $40M in cryptocurrency and blockchain!
As explained by Forbes, 2 separate pension funds that collectively manage $5.1 billion in assets for the state’s police force have joined a $40 million investment in the Morgan Creek Blockchain Opportunities Fund. This fund invests in some of the best-known startups in the blockchain space, but also plans to invest in cryptocurrency. Already, a portion of the $40 million has been invested in startups including Bakkt, the cryptocurrency exchange co-owned by Starbucks and the Intercontinental Exchange, which runs the New York Stock Exchange.
Before looking into more details of this news which we consider ‘breaking news’ for the cryptocurrency sector let’s look into our prediction which we published 5 months ago:
We see lots of signals that 2019 will be THE year in which institutional money will finally enter the cryptocurrency market. This is one of the cryptocurrency predictions for 2019 that will be a game changer for the crypto market, without any doubt. We strongly believe that institutional money will be the catalyst for a resumption of cryptos grand bull market!
Moreover, we strongly recommend readers to read our Crypto And Blockchain Investors: The 200 Most Important Words For 2019 article. It looks into the vision of Bakkt when it comes to institutional capital entering the cryptocurrency space. It has timeless insights, and there is a reason we picked this as THE most important 200 words for this year for crypto investors. This really applies to the news about the pension funds.
Why Is This Breaking Crypto News?
So why do we consider this then ‘breaking news’ if this is just the first case of a pension fund investing in cryptocurrencies? Also the price of Bitcoin did not react on this?
That’s because of 2 reasons. First, it sends a strong signal of trust and credibility. The first one is always the most difficult one. At a certain point the number of participants will accelerate. Second, the price of Bitcoin does not react on just news of one case. We need critical mass. But the fact that we have these 2 institutions entering cryptocurrencies at the current ‘low’ price of Bitcoin at a time when there is so much disbelief and pessimism is an amazingly bullish long term signal.
The First Pension Fund Investment In Crypto & Blockchain
According to Katherine Molnar, chief investment officer of Fairfax County’s police officer’s retirement system, in a statement: “Blockchain technology is being applied in unique and compelling ways across multiple industries. We feel it is important to be opportunistic and are excited to participate in this emerging opportunity.”
In addition to Bakkt, the fund, created by Morgan Creek Digital in New York, is investing in cryptocurrency giant Coinbase, recently valued at $8 billion, and several lesser-known startups, including Blockfi, RealBlocks, TrustToken, Harbor, Open Finance Network, CityBlock Capital, Namebase, Good Money and Digital Assets Data. As much as $4 million of the investment could eventually be used to purchase cryptocurrency directly, though that has not happened yet.
Here are 2 very, very important points related to the specifics of this news item: Through Forbes:
While terms of the investment are not being disclosed other than that it is a special-purpose vehicle, meaning the investment will not come up in the startups’ capitalization tables, Morgan Creek Digital co-founder Anthony Pompliano says a “material amount of the fund is already invested.” Pompliano says his firm originally wanted to raise $25 million, but increased the round due to its popularity.
Moreover, Katherine Molnar, chief investment officer of Fairfax County’s police officer’s retirement system, said that she saw a compelling investment opportunity because of the “asymmetric return profile that it represents.” This means: long term price rise of bitcoin and other cryptocurrencies.
Morgan Creek Digital co-founder Anthony Pompliano notes that “these are incredibly intelligent, long-term thinking, permanent capital allocators, and so they have a very different mindset than retail investors or some other capital allocators.”
InvestingHaven’s Research Team Does The Math
The things that stand out according to us:
- The popularity of this investment opportunity which lead Morgan Creek to increase the round from $25M to $40M, almost double. This means there is more investment appetite than even insiders expected.
- The expectation of professional investors that manage low risk capital (pensions from state employees) that cryptocurrencies and blockchain have a great future both as a technology but also in terms of value (cryptocurrency prices) long term!
- Professional investors are happy to buy low, while many crypto investors are disappointed by the current low prices. Professionals see the opportunity, others see a problem, as they look at the same price levels.
- The companies that Morgan Creek has invested in have a significant presence in the security token space!
Let’s do the math now.
If 2 pension funds managing $5.1B in assets invest $40M in blockchain and crypto it means 0.78% of their total assets under management.
If all institutions in the U.S. have $46.6T (trillion!) assets under management (source) we can reasonably expect that certain percentage will flow into blockchain and cryptocurrencies. Best case it is 0.1%, worst case it is 0.01%. In dollar values this means best case $46B and worst case $4.6B.
The current market cap of Bitcoin is $63B at the time of writing.
You see where we are going with this?
Note, we just looked at U.S. only institutional assets. This excludes the rest of the world which is presumably another 50% and 70%.
The math is clear, the business case is clear, the first signs are here. Our prediction that institutional money will be an important driver for the next crypto bull market is underway! Higher crypto prices will be there, but only for a select few cryptocurrencies (the ones that really add value). Security tokens must be part of your future crypto portfolio!
These are the themes we talk about for a year now in our premium blockchain & cryptocurrency investing research service. Everything is documented extensively, and there are many alerts sent in the last 12 months to our members which forecasted we see is happening now. We pride ourselves not only that we were the first in the world to offer a blockchain & cryptocurrency investing research service but also that our forecasts are visibly underway.
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