David Olsson, vice president of Europe and Asia at BlockFi, joined host Teana Baker-Taylor to discuss crypto demand. BlockFi is seeing huge demand on the fiat side of dollars and stablecoins, which has been fueled by the climb up to all-time-highs at USD 58K on bitcoin. Despite the recent pullback, they are still seeing rates in the mid-teens in terms of dollar demand. Dollars and stablecoins are required to buy long positions in spot or even levered long.
(1:09) “On the flip side, in terms of buying bitcoin and other cryptos, we’re seeing muted demand even with the downward move, which leads us to believe actually that it was driven more by liquidations and forced liquidations of speculators rather than the smart money coming in and borrowing bitcoin , shorting or hedging and driving price down,” said David.
Bitcoin as a payments solution has been gaining traction, with Tesla having made a major bitcoin purchase and deciding to accept BTC as a payment method.
(1:53) “We believe corp adoption is here to stay. At the moment, we see a huge groundswell in the number of corporate accounts that are being requested on the platform. And we even have a two week waiting list for corporate account openings. And we’re hiring more people just to be dedicated to doing that,” said David.
It’s not just mom and pops or people with personal LLCs that are opening accounts. It ranges from SMEs to large businesses, including window cleaners, auto glass manufacturers, a church, and restaurants, for example. They are all looking to hold a portion of their treasury in bitcoin or stablecoin or a mixture of both.
(3:27) There are a few catalysts driving the demand that BlockFi is experiencing, one of which is just defense against inflation. The U.S. is about to inject USD 2 trillion of stimulus into the economy, and Europe is also seeing helicopter money and fiscal stimulus. So corporate treasurers are thinking about bitcoin as a store of value and defense against inflation, David said. Plus in Europe, there are still negative interest rates. So it could also be as practical as corporates saying they want to accrue some interest and need some income on their treasury holdings.
Another driver could be the fact that BlockFi offers 8.6% on stablecoins and single digits on other cryptocurrencies.
(4:20) “And then the third thing that you sort of touched on was FOMO in that you’ve got MicroStrategy and Tesla, huge companies, that have allocated to their balance sheets. And corporate treasurers are saying to themselves, ‘If I don’t, my job might be at risk. I need to at least look at it now.’ So there may be other S&P 500 companies to follow,” said David, adding that Apple is rumored to be among them.
The below graph illustrates that BlockFi has seen the number of funded accounts grow by 4x, over 400% over the last year. The USD notional holdings in those accounts have increased by 220% over the last year.
(5:14) “So it’s happening more frequently and then corporate treasurers are feeling more confident about adding to their crypto and stablecoin holdings,” said David.
(6:11) When you think about how a corporate treasurer would think about an allocation to bitcoin, if they have liabilities in bitcoin, such as employees who want to be paid in BTC or goods and services that are denominated in bitcoin, then it behooves them to have bitcoin on the asset side of the balance sheet, said David.
In Latin America, you’re seeing just that — employees and goods denominated in bitcoin. There are some companies that want to pay their employees a portion of their salary in bitcoin just as a perk to differentiate themselves from other companies. In the U.S., NFL player Russell Okung asked to receive half of his salary in bitcoin and then became the highest-paid player based on a USD notional value as a result of that.
(7:07) The other thing here is to look at some of the bigger treasuries, like a CIO who allocates across different asset classes. They might have an alternatives or a commodities bucket in which they allocate 5-50% to gold, oil and hedge funds as well as other alternatives. Bitcoin can fit into that portion of the allocation.
(7:33) “And it’s also maybe as a defensive strategy against inflation…instead of buying TIPS or CHF as a defensive currency. The Swiss franc has only appreciated by 8% vs. the USD over the past year whereas we know bitcoin has appreciated 500% plus. So there’s a lot of good reasons for corp treasurers to look at,” said David.
MicroStrategy’s Convertible Bond
(7:58) MicroStrategy just placed a convertible bond for USD 1.1 billion and notional priced at zero. There’s a convertible option embedded that is basically a call option on bitcoin. So for the holder of the bond, they get a free-up call option on the stock, which is very correlated to bitcoin at the moment, noted David. And then on the asset side of the balance sheet, MicroStrategy has the ability to allocate more of its assets to bitcoin.
(8:46) “So it’s a bit of a win/win scenario as long as MicroStrategy doesn’t default on the principal amount,” said David.
Teana asked David for his bitcoin prediction and whether the price will hit USD 60K in March, as well as his thoughts on the laser eyes craze.
(9:28) “I think we’re in a short-term period of consolidation. So I’m not sure about USD 60K by March,” said David, adding that he is a fan of the laser eyes trend happening on Twitter.