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Bitcoin ETFs and Corporate Adoption Are 2 Key Crypto Catalysts to Watch

By Chris MacDonald – Nov 19, 2021 at 8:45AM

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Institutional money is a big deal in the crypto world.

Crypto-enthusiast Chris MacDonald discusses with The Motley Fool's Eric Bleeker why he believes Bitcoin (BTC -0.30%) ETFs and rising adoption of crypto by corporations could be key drivers to watch for over the longer-term, on this episode of "The Crypto Show" from Backstage Pass, recorded on Nov. 10

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Eric Bleeker: Tim Cook said he has been interested in crypto for a while. He is personally invested in the space.

Now, here's what I think is going to be interesting. We had MicroStrategy (MSTR -0.95%) [laughs] reporting last night, I think they're up past 9,000 Bitcoin in their treasury. One of the bull cases for Bitcoin is if you have treasury adoption across large S&P companies, that's going to put a lot of positive pressure on the price of Bitcoin.

Tim Cook says, for now, his investment is personal. It's not something Apple (AAPL -1.79%) is considering on its balance sheet. But Chris, I would note. The fact that someone of Tim Cook's stature is saying that he personally owns this is just another positive sign of the luminaries of Silicon Valley, really being interested in crypto in general.

Chris MacDonald: Tim Cook is someone people listen to for sure. I think Apple is a company in general that people look at as to where they're putting their excess cash, because, whether it's Apple or Berkshire Hathaway (BRK.A 0.05%), companies with 100 billion plus in cash just sitting there -- where are they going to put it?

Most of the time, it's in marketable securities or short-term paper. But there are companies, whether it's Tesla (TSLA 2.52%), that is high-profile cases of corporations putting up their cash as Bitcoin and deciding to diversify a little bit into crypto to get those returns. I think that is an interesting thesis that there could be more adoption from the corporate side.

I think you're going to show some more data too on the venture capital space and how much capital is flowing into Bitcoin a little bit later on, so there'll be more on that. But I do think that in terms for Bitcoin or for Ethereum (ETH), some of the bigger names, that's likely to continue to be a big driver.

Bleeker: Yeah. Here is one such driver. We look at inflows into Bitcoin, and the reality is right now, there's a lot of, we're, being something that is decentralized and deregulated by nature, there has been a lot of factors holding investment into things like Bitcoin back.

We saw recently the launch of the first Bitcoin ETF. This week though, there is another opportunity that many investors might mess because it's not from America, so you're not going to see a lot of coverage, which is Australian regulators at the end of October gave the green light to crypto exchange-traded funds, which could see Bitcoin and Ether ETFs trending on the country's stock markets in the coming months.

Now, two points I want to make on this and why I highlighted this among all of the potential news this week. Number 1, what we have right below. Australia might be a small country. I believe it's only a population of 25 million, but has the fifth biggest pool of pension assets in the world, which is an incredible figure.

Second, I know very well Australia has an investor nature. The Motley Fool has been in Australia for a long time. It's an incredibly successful market for us, in part because they have a lot of regulations driving people toward investing and making it an advantaged space.

Let's see a quote here what you're going to see is literally every month, another 50 million or 100 million will go into crypto ETFs in Australia. It doesn't take very long before it becomes a big number, and that's from a local, we'll just say, expert in the space. And as one reminder, when we're looking at a potential catalyst in the future, the US has only allowed Bitcoin futures  ETFs to launch and that might sound like a trivial point, but it definitely means that there is a lot less capital flowing into the space and there could be.

The first Bitcoin futures ETF launched and got $550 million in funds on its first day of trading, which again, that's a number without context, but here's the context that matters. The ETF that has the largest amount inflows is a Vanguard ETF and what that added in that first day is about five-fold the level that Vanguard ETF, which I might note is larger, the scale of order of magnitude larger than even the 10th largest ETF. That launch was truly historic.

Chris, when you look at this, what are you thinking is reasonable to expect ETFs as a major catalyst for Bitcoin in 2022?

MacDonald: I think the US is obviously the biggest market in the world for ETFs. But when you look around the world and look at where other countries are headed, so Australia is a great example. I know Canada has launched a Bitcoin ETF that is actually tied to spot Bitcoin.

There are markets where these ETFs have been launched. There's a precedent for it. That suggests that regulators may not have that difficult of a time doing it in the US if it's already being done let's say in Canada or Australia, which are smaller markets by population but have quite a bit of capital like you mentioned. It's significant news in that these markets opening themselves up to the innovation that ETF companies are trying to provide. That just lends itself well for this happening in the US as well. It's an important thing to keep an eye on for sure.

Bleeker: Yeah, I think that's a great point, that precedent is going to make it easier for regulators.

Eric Bleeker owns shares of Apple, Bitcoin, and Ethereum. The Motley Fool owns shares of and recommends Apple, Berkshire Hathaway (B shares), Bitcoin, Ethereum, and Tesla. The Motley Fool recommends MicroStrategy and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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