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On Wednesday (November 25), Tyler Winklevoss, Co-Founder and CEO of crypto exchange Gemini, said the current Bitcoin bull run is different from the one in 2017. Gabor Gurbacs, Director of Digital Asset Strategy at VanEck/MVIS, took note of the Gemini CEO’s comment, and decided to explain why.
This was Winklevoss’s tweet:
In his blog post, Gurbacs points out that “while the 2017 bitcoin rally was driven by higher volumes, likely due to retail demand, the 2020 price rally so far has been driven by lower volume.” He then goes to say that at global investment management firm VanEck they believe that “the 2020 rally is driven more by institutional allocation and that investing in bitcoin has become less speculative in nature, which indicates bitcoin’s increasing status as a store of value and suggests further potential adoption.”
In short, Gurbacs believes that unlike Bitcoin’s H2 2017 rally, Bitcoin’s current parabolic rally is being driven mainly by institutional investors rather than by retail investors.
There have been several developments in 2027 that have led to this conclusion:
- “On the treasury front, a number of public and private companies started investing in bitcoin as an alternative to holding cash on their balance sheet.”
- “On the regulatory front, the Office of the Comptroller of the Currency (OCC) published a letter in late July, clarifying the authority of national banks and federal savings associations to provide cryptocurrency custody services for customers.”
- “On the payments front, we note that the current rally is supported by PayPal’s launch of a new service enabling bitcoin and digital asset buying and selling to its network.”
Interestingly, earlier today, MV Index Solutions GmbH (“MVIS”) announced “the licensing of the MVIS CryptoCompare Bitcoin VWAP Close Index (ticker: MVBTCV) to VanEck for the use as an underlying index for a Bitcoin exchange traded note (ETN).”
The new product, which is called “VanEck Vector Bitcoin ETN”, is listed on Deutsche Börse Xetra. Deutsche Börse is “the first trading platform worldwide to offer centrally cleared trading of crypto ETNs.” Using this product, “investors can participate directly in the performance of the leading cryptocurrency Bitcoin without having to buy it directly.” Currently, this product is only available to investors based in Germany, the Netherlands, and the U.K.
Martijn Rozemuller, Head of Europe at VanEck, had this to say:
“Bitcoin’s historically relatively low correlation to other asset classes makes it an excellent way to contribute to the diversification of a portfolio.”
The MVIS CryptoCompare Bitcoin VWAP Close Index is “an index designed to measure the performance of a digital assets portfolio which invests in Bitcoin, with a closing value based on an hourly VWAP price.” It’s a rules based index which covers the broadest CCCAGG pricing for indices provided by CryptoCompare.
The volume weighted average price (VWAP) is “a trading benchmark used by traders that gives the average price a security has traded at throughout the day, based on both volume and price,” and it is important because “it provides traders with insight into both the trend and value of a security.”
Steven Schoenfeld, CEO at MV Index Solution, stated:
“We are proud to be the index provider for this trailblazing product. The MVBTCV index enhances investor confidence by accurately tracking the Bitcoin price, and is a key member of our growing Digital Asset Index family, which continues to pioneer the cryptocurrency space.”
And Gurbacs had this to say about his firm’s new Bitcoin ETN product:
“VanEck is committed to support Bitcoin-focused financial innovation. Bringing to market a physical, fully-backed major exchange-listed Bitcoin ETP was a top priority of our firm. We succeeded! We hope to serve many clients and partners in Europe, Asia and across the world using our innovative, investment-friendly and regulatory-conscious access vehicles.”
Dominik Poiger, Product Manager at VanEck, says:
“Our Bitcoin ETN is fully collateralised. This means that the money invested in the ETN is actually used to buy Bitcoin. In this way, each ETN represents a certain amount of Bitcoin.”
VanEck is using Liechtenstein-based Bank Frick as its crypto custodian.