Bitcoin is one of the most unequally distributed assets in the world, with just under half a percent of all bitcoin investors owning more than 80% of all bitcoins, and should they liquidate, the market could see a substantial sell-off, said Ryan Giannotto, director of Research at GraniteShares ETFs.
One of the most profound hypocrisy is of Bitcoin, is that while it's an asset intended to democratize finance, it's also one of the most unequally distributed assets in the world that is according to our next guest Ryan gelato, director of research at Greenwich shirts, ETFs, Ryan, welcome back. Happy new year.
It's a pleasure speaking with you. Let's start with Bitcoin. Can you explain what I meant by what I just said? I quoted you right. Just now. What did you mean by that? Yes, David, it's great to be back. Yes. And that is one of the fundamental ironies of Bitcoin. That really it's a major challenge for the asset class.
It is intended to be a financially democratizing force yet it is so profoundly, uh, distributed in an unequal fashion. It's really unlike anything we've ever seen. And this is one of the perils of Bitcoin investing that goes on unreported undiscussed, and that really investors need to pay attention to.
It is a seriously quartered asset class where only about five hundredths of a percent of Bitcoin investors control over 40% of all Bitcoin. And this is a serious, serious problem. And even if we go down a little further, we can see that about just under half a percent of all investors control over five, six of Bitcoin.
This is a massive problem when you have a seriously on equal playing field and Ms can only exist in the unregulated asset. That is Bitcoin. It's a double-edged sword. There are virtues to being unregulated, but here we can clearly see that it is a substantial peril for all investors. Given that so few control substantially all assets.
Right. And how is that different in concept from, let's say a stock that just simply hasn't majority stakeholder in it, for example, Tesla, 20% of Tesla stock is owned by Musk, but that's, I mean that that's a risk you have to consider every time you buy any asset, right? Yes. Yes. But what we need to consider here with Bitcoin is that the market is effectively cornered, not even the hunt brothers.
Could you dream in their wildest fantasies of how corner Bitcoin asks, how Bitcoin has become, where, you know, we need to think about how big, how the silver, you know, the hunt brothers control less than one third of the percent of all silver. Yet we're able to basically increase the price of silver find fault.
And this is what happened with Vic. One of supply is so tightly controlled by so few. If indeed those investors have to take any profits, basically the asset class. Is, it becomes a wash and this is one of the dangers and it's really why we've seen such volatility with Bitcoin and also to the downside, the down draws.
If there is any attempt by these sort of original investors to take profits, to take risk movements, the volume will drown the asset. Well, the hunt brothers involvement with the silver market was widely speculated to be the cause of the huge spike we saw in the early eighties. Do you think something similar is happening with Bitcoin today?
Is that why it went from, I don't know, 10,000 to 40,000 in less than three months? Yes. I mean, the asset has been just, I mean, it's been a roller coaster ride to say the least. Uh, you know, I really, I don't think there's any real precedence, uh, you know, any real precedent we can consider benchmark Bitcoin against.
And again, this is a, you know, this is a indication of how tightly controlled the market is. There is still free Bitcoin available and so much ravenous demand. And if in fact. Those original controlling investors decide to take profits. ABA will drown the asset class, and this may be what we saw, you know, back at the last bubble.
You know, when it peaked about, uh, 19,000, whatever, that's a Bitcoin arm from an economic and philosophic standpoint, this is a real challenge. The asset needs to surmount to become a legitimate mainstay investment. Well, I guess the obvious question then Brian is who are these individuals holding the majority of Bitcoin and what are they thinking?
So, I mean, do you have any insight as to whether or not it's institutions or, uh, any particular individuals like, you know, who are these people? Well, we can all go well, that's the great thing about Bitcoin being a digital ledger. We can all go and look up it's public information, the concentration of this asset and the, but the downside is it's anonymous.
We don't know who they aren't. We just know that it's sort of like a, you know, black holes. We can check their gravitation, but we can't directly observe them. And, uh, just, yeah, it's really illuminating. Most likely. These are people. Who got in early, you know, when it was at, you know, effectively zero substantially, zero, and have wrote it up all the way, it could also be, you know, the cold lost Bitcoin investors where they've been locked out of their accounts.
And, uh, so it's really, there are a number of forces. They have constricted constricted the supply in Bitcoin and have really seen a dramatic surge in interest in price. Can you comment on the liquidity of Bitcoin as an asset? How easy is it for? Let's say, let's say the majority stake holders of Bitcoin that you pointed out.
Let's say they were all to decide to sell the next day, what their, what their sales, you know, I think that's an untested event. But, you know, if these decide that these, you know, original investors assign it to Jake Robyn, so they decided to sell it, they decided to execute. You know, it would be several times a daily traded volume of Bitcoin.
It would wipe the asset out, whether it go from there. I don't know. We've never seen an event, an asset like this. That's been fundamentally unregulated and that's part of the excitement, the ride in also the, I, I w can you comment on the mechanics of an asset that moves 20%, 30% in a day? This is what we saw.
Last time I went, what happened? How much liquidity and how much trading volume does it take to move an asset 20% in one day in either direction. Do you want me to hold it on a supply and demand? That's what it all comes down to and what we're seeing, what is producing these dramatic upswings in particular?
Is that there is such a finite supply of Bitcoin relative to, you know, it's predominantly retail investor demand, very small purchases that are just driving the price up. Is it a bubble? Is it the next currency? We don't really know. And that what's so fascinating is that the behavior of central bank? So you responsible throughout 2020 really?
It makes Bitcoin look, uh, for more attractive, an alternative it's a for the first time central banks have a direct benchmark. Okay. We talk about institutional money buying into Bitcoin a lot on the show. Well, granted shares as an institution. Are you considering adding cryptocurrencies to your holding?
Let's say to the hips ETF, for example, we wish we wish. And that's part of the excitement of the space. Now is that with the new. Uh, sec chair is he's a bit of a, you know, Bitcoin fanatic. Uh, he held courses on blockchain and we will finally probably be able to see a big point ETF in this. The real potential here is that institutions now have a real way to access the market, unless they just want to go and buy individual Bitcoins.
But because it's an unregulated market. Many have been unable to cross that Rubicon and Bitcoin ETF will absolutely provide a gateway. It's a real institutional capture. And that's what I think is so fascinating. We see almost apparel like parallel dynamic between Bitcoin and Tesla, where basically institutional interest has forced instituted or sorry.
Retail interest has forced institutional capture. Basically, it's been a hostile takeover of, you know, the investment institutions behind just sustained and fervent retail interest. You know, the S and P 500 had to adopt Bitcoin because of retail investors. Do we could see a similar dynamic play out with Bitcoin.
Yeah, I, I, you know, you're right. You brought up the ETFs, there have been several attempts in the past to, uh, to, to make an ETF for Bitcoin. I th I believe the Winklevoss brothers have attempt, have attempted that as well. And, uh, that got rejected by the sec. Why were these attempts rejected and what's changed today?
Great question. Yes. As you bring up, you're coming from the ETF space, there were. Probably at least a dozen serious well-thought-out well-reasoned ETF applications. They were summarily executed. It all came down to the sec chair, uh, outgoing chair, uh, you know, Clayton with him out of the picture. The it's now it's now all, but it was really a game of legal cat and mouse.
What they said was it was at, it was one, it was not regulated. But the emergence of Bitcoin futures on a CME, uh, exchange, you know, for a, you know, regulated in orderly marketplace that could be observed. The second argument, however, was that it was not a significant asset class, that it was too small.
There was not enough interest. And I mean, by now I think this is what we talk about. When we talk about institutions, Ryan White wash the hands. Why don't you go make one there don't tell me. I have trust me. We tried, we have tried, we have personally applied inflate. This came this cat and mouse game with regulators.
We have been shot down every step of a wet up. Why is it so much more difficult to make a Bitcoin ETF and not a gold ETF? Did you go through the same legal loopholes? When, when granted shares created bar? Well, I mean, you know, well, no, I mean, because basically it all comes down to that the sec hated Bitcoins, they were not going to seriously.
The sec chair was not going to allow it under any circumstance and with his departure and a new blood shoes, you guys coming in, you know, uh, Vanek has filed many other, you know, entrance have come in. We, I think we will likely see such if not, if we don't see a Bitcoin ETF in, uh, 2021, we will see substantial price.
What's going to happen once Bitcoin ETFs are legalized. We're not legalized, but allowed and, and introduce the market. Are we going to see less volatility? We're more. That is such a tough question. I mean, once an asset matures, one would think. That it becomes less volatile. Right? And this is the conversation I remember having with my friends very, a couple of years back as Bitcoin matures into an asset that's adopted by more users.
We should see less daily volatility, but we're still seeing, you know, 10, 15, 20% moves in a single day. So clearly my thesis was wrong. You know, it all comes down to again, how basically the effective float for Bitcoin is so small relative to the asset class. Um, with basically the substantial majority controlled by, I guess what you'd call inside investors.
There's such a small amount of Bitcoin relative. That's actually able to change hands. And the prices of Bitcoin, where they are now, where they may go or Odyssey of these institutional holders that have not, uh, basically increased the flow, increased the, uh, supply. They're basically holding tight. They haven't sold yet.
I don't know. I can't speculate what their motivations are, but that's. That's the fundamental driver of a volatility or not. All right. Uh, last segment of the interview, I'd like to get your thoughts about the economy and inflation and, uh, you know, gold has been tapering off lately. I suspect it's because inflation expectations have come down in the wake of a weaker economic outlook jobs.
Numbers are still bad. What do you think? What's your take? You know, it it's, we, we we've seen the 10 degrees, uh, you know, it's now over, you know, 1.1 it's breached that a threshold. Which this is a, you know what, let's be honest. This is a phenomenal recovery, you know, in, uh, you know, in treasury yields, you know, they bought them down at a, you know, just over, uh, you know, 30 BEPS, you know, this is, you know, very meaningful redeem of things.
These are very diminimous yields, uh, in returns on investments and, um, you know, the expectation inflation expectations. They're in flux right now, they're in flux. People are trying to understand what the new administration will bring, how, you know, yelling will take kind of the fed, uh, you know, once more will be more of the same, or is past Yellen precedent, you know, no longer valid.
Are we now in a whole new, uh, you know, economy? Um, the playbook has been thrown out. It's been burned. It's been destroyed. It's been, it's gone. It's gone. So this is what's really exciting. We don't know where inflation can go. And, uh, the bond markets are trying to price this. What this means for gold is, is that although nominal yields have increased inflation expectations are very erratic.
You know, we're seeing commodity prices rise. Uh, the dollar has been weak. But, uh, I think the real potential for gold is strong. All right. Very good, Ryan, thank you for your update today. We'll we'll talk more about the economy next time. Thank you very much. Thank you very much. Thank you for watching.
Kiszko I'm David Lynn, stay tuned. .