In July 2020 the Financial Conduct Authority (FCA) in the United Kingdom estimated that 3.86% of the general population now owned Bitcoin or an equivalent cryptocurrency. That is 1.9 million UK adults. In the USA it is estimated that 11% of Americans hold cryptocurrency. Bitcoin has become mainstream as companies including Tesla, Square and PayPal have become ‘whales’ in the market by buying up 70% of the new supply of Bitcoin.
Between 800 and 900 Bitcoin are added to the market on a daily basis according to data firm Messari. Only 21 million Bitcoin can ever be mined (created), which gives it the same scarcity value as assets like gold. The unique Bitcoin process of ‘halving’, whereby for every 210,000 blocks that are mined the rate at which new Bitcoin are released is cut in half, means new supply is contracting as new demand surges.
Yet opinions on Bitcoin as an investment class, or as a ‘safe haven’ equivalent to gold, remain polarised. In October 2020 the FCA in the United Kingdom banned the sale of crypto derivatives to retail investors, citing their extreme volatility. Yet with Bitcoin ETFs already listed in Germany and Switzerland, the UK may soon change its position. The challenge for highly–sophisticated investors is to navigate this frontier and high-risk investment class.