The year bitcoin seduced your retirement plan

Institutional investors are snapping it up, around thirty financial products are linked to it on the Toronto Stock Exchange, it appeared in New York and its price has shattered records. The year 2021 has undoubtedly been a landmark year for bitcoin and, in its wake, for the approximately 8,000 cryptocurrencies that have appeared in the last decade. Will the bubble burst or transform the international financial system? Experts speak out.

Posted on January 3

Karim Benessaieh

Karim Benessaieh
The Press

1263 billion US

Total value of 18.7 million bitcoins in circulation when the currency reached its peak of US$67,553 on November 8. The value of all cryptocurrencies is estimated at 1800 billion US. For example, Canada’s gross domestic product was US$1643 billion in 2020.


36

Number of products available on the Toronto Stock Exchange related to cryptocurrencies, essentially the two most popular, bitcoin and ethereum. These include the world’s first exchange-traded funds, closed-end funds and actively managed funds.

1

In the United States, a first exchange-traded investment fund (ETF) appeared on the New York Stock Exchange last October, ProShares Bitcoin Strategy. It does not fully replicate the value of the cryptocurrency, but rather is linked to futures contracts.

Mathematical stability

3iQ, a Toronto-based firm founded by Montrealers Jean-Luc Landry and Fred Pye, was the first in the world to launch a bitcoin-based closed-end fund in April 2020. It offers two ETFs based on bitcoin and the ‘ethereum since last spring. “It was a pivotal year,” summarizes François Dionne St-Arneault, 3iQ’s Director of Products and Sales for Canada.

“At the point where the total value of cryptocurrency has reached, you can no longer ignore it. »

He believes that with the inconstant monetary policies of central banks linked to the pandemic, bitcoin, with its immutable mathematical mechanics, has paradoxically shown its relevance. “There’s a lot of volatility, market drivers like a single tweet from Elon Musk that has a lot of influence, but you realize bitcoin isn’t influenced by government policies. »

64%

Estimated proportion, in the first quarter of 2021, of cryptocurrency transactions attributed to institutional investors, according to the Coinbase platform. These would be behind 215 of the 335 billion US exchanged. The interest of these large institutional funds for cryptocurrencies, in particular the Caisse de dépôt et placement du Québec (CDPQ) which invested 400 million in them last October, marked the year 2021, estimates Martin Lalonde, president and portfolio manager. at Rivermont.


PHOTO ROBERT SKINNER, LA PRESSE ARCHIVES

Martin Lalonde, President and Portfolio Manager at Rivemont

“Big institutions follow the money. Their goal is to maximize returns, they realized that the demand was there, and the obvious increase in the value of cryptocurrencies is generating interest. »

François Dionne St-Arneault, at 3iQ, has lost count of the webinars he gave this year to explain bitcoin and its derivatives to business leaders. “The year 2021 has really been the year of the entry of more serious institutions into the world of bitcoin. In the United States, there is not a financial institution that does not have its team dedicated to this asset class. »


Companies

Microsoft, Home Depot, Starbucks, a fintech Canadian company such as Ledn, which announced bitcoin-backed mortgages in the fall: many companies agree to be paid in cryptocurrency. The most publicized of them, Tesla, announced it at the beginning of 2021 while revealing that it had acquired 1.5 billion US in bitcoins. Its CEO and founder, Elon Musk, however, backtracked the following May by suspending the possibility of acquiring a Tesla car with this virtual currency because of the greenhouse gas emissions associated with its “mining”.

Third wave

That said, the use of cryptocurrencies remains the exception in the classical economy. Most studies put the percentage of Canadians owning cryptocurrencies at around 5%, bitcoin in the overwhelming majority of cases.

After early adopters and interest from major institutions, “the third wave,” the one that would see massive adoption, hasn’t really begun, says Voicu Valentir, president of the Cavaliro group, an investment firm from Laval. .


PHOTO ALAIN ROBERGE, LA PRESSE ARCHIVES

Voicu Valentir, president of the Cavaliro group, an investment firm from Laval

With the growing popularity of these decentralized virtual currencies which escape the tax authorities as long as they do not enter the traditional economy, he sees another trend emerging: regulation. The Biden administration, in the United States, has multiplied the signals of concern about bitcoin in 2021, seeing it in particular as a tool for financing crime.

“Imagine that Bombardier decides to pay its employees in bitcoins, directly on their anonymous private key, gives as an example Mr. Valentir. The government will say, “Hey, I want the names, tell me who you’re paying.” »

What is bitcoin?

This electronic money was created artificially by a group of computer scientists under the pseudonym of Satoshi Nakamoto in 2009. By convention, the number of bitcoins issued is halved every four years; it is currently 6.25 bitcoins every 10 minutes given to “miners” whose computers manage the exchanges. Technically, all bitcoins, or 21 million, will finally be issued in 2140. The register itself requires more and more resources to be managed. This scarcity and ever-increasing computing power were intended to model the behavior of bitcoin on that of commodities such as gold. Its value in traditional money, very fluctuating, depends essentially on supply and demand. For a manager like Martin Lalonde, caution is in order, even if the returns are tempting. “Most of our clients will put a small percentage of their investments in cryptocurrency. Enough to move the needle when it goes up, but not so much as to jeopardize its heritage. »

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