Source: Statista.com

Interestingly, it is not only individual citizens who are increasingly turning to cryptocurrencies but institutional asset managers too, with Coinbase reporting that its institutional clients have increased their crypto holding from $6billion to $14billion since April 2020. Firms such as Pendal Group, in Australia, claim to be investing in Bitcoin as an alternative to gold. Highly regarded investors are singing Bitcoin’s praises, including Paul Tudor Jones, Bill Miller, and Stan Druckenmille. The latest institution to express an interest is Guggenheim Partners which manages over $275 billion  and has filed documentation with the SEC to potentially  invest $500 million into Bitcoin.

As with any investment, unless you have a crystal ball, knowing when to buy any asset is difficult to predict so an alternative way is to save a regular amount each month. This concept of regular savings (sometimes referred to as pound cost averaging) is ideal for more volatile assets, i.e those assets whose price ‘zigs and zags’ (goes up and down a lot!) Putting money aside on a regular basis enables one to smooth out these ups and downs, buying more of the assets when prices are low and less when prices are high. By investing $10 a week every week over the last year, your $530 of savings (ignoring fees) would now be worth $1,138, a profit of 114.75%! This can be compared to investing the same amount into gold which would be worth $556 or the US Stock Market (as measured by the Dow Jones index) which would be worth $598.

The result of regular saving into BTC, gold and the US Stock Market (Dow Jones)

Assumptions- $10 saved per week, no costs

Source: DCABTC.com

Janet Yellen at a congressional hearing in 2017- bet she wished she had bought BTC! 

Source: YouTube

In the past Yellen has not been a fan of cryptos and made that very clear when she was Fed Chair speaking to the House Financial Services Committee on 13th July 2017. She was ‘photo bombed” by a Bitcoin fan, holding up a message “Buy Bitcoin”, who allegedly was subsequently sent small crypto donations worth the equivalent of 7 Bitcoins. Those 7 Bitcoins would have been worth approximately $16,000 back in the summer of 2017, compared to today’s value of over $131,000. One might suspect Yellen did not take the photo bomber’s suggestion. Or maybe she did since she has said very little in public about cryptos in the last few years! 

One muses that with Yellen’s classic Keynesian economic training she will favour another significant injection of cash into the US economy. Reuters has reported she is “someone who normally favors looser monetary policy to reduce unemployment”. Given the current almost 0% interest rates, it will be interesting to see how supportive Yellen will be towards a US Central Bank Digital Currency (CBDC) so that the US government can, in effect, give money to those most in need. To have a ‘new tool’ to stimulate the economy in a focused manner, as opposed to ‘helicopter cash’ i.e. giving cash to many and additionally having to pay the banks to distribute it for the government. A CBDC would make it possible to make payments incorporating the stipulation for it only to be spent on certain products and services within x weeks as opposed to be being saved, which would seem to have happened earlier this year. The Wall Street Journal reported that the US personal savings rate soared to 33% between Feb-April 2020  so, in effect, the US government increased its indebtedness whilst its citizens repaid theirs. If inflation were to return, then a transaction fee could be levied on those using a CBDC as a method to slow down the circulation/speed of money in the economy. 

Who knows how much Yellen takes counsel from her Nobel-prize winner husband, George Akerlof, who wrote a paper called the ‘Market for Lemons’? In it he says, “If a market has substantial “information-asymmetry” (sellers know a lot more about the good than buyers -e.g. 2nd hand cars), it will come to be dominated by lemons (bad cars)”. Since one of the challenges cryptos face is the perception caused by many of the 5,000+ ill-conceived ICOs which were launched in 2017 and 2018: many, at best, were ‘iffy’ and, at worst, fraudulent. As reported by the publication, Finance Magnet, the SEC has, “since May 22017, with its 4,500 staff, revealed over 2,750 enforcement actions obtained over $14 billion in financial remedies and paid around $565 million to the whistleblowers in the same period.”