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Bitcoin Could See Q4 Rebound as Investors Hunt for Yield

CryptocurrencyJul 16, 2021 05:03PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com –  Bitcoin's fall from grace hasn't quieted its supporters, who are confident the hunt for yield will land institutional investors at the popular cryptocurrency's door as soon as fourth quarter. 

"We're looking at three volatile months, both up and down [...] but I still think we'll see $100,000 this year, probably in the fourth quarter," Michael Venuto, chief investment officer for Toroso Investments, said in an interview with Investing.com.

This next big driver of demand that will ultimately revive the bull run for bitcoin won't have anything to do with the popular cryptocurrency. In their hunt for yield, institutional investors will begin to seek out bitcoin and other cryptos.

Institutional investors are well versed in the hunt for yield, or the lack of it, especially in the bond market, where the low-rate environment has served up pitiful, and even negative returns.

But the big bet from institutional investors won't be on the direction of bitcoin and other cryptos, but on the yield they can generate when loan out to borrowers. 

"People are will start to realize they can stake their cryptocurrency Bitcoin, USDC or other cryptos and receive a 4% or 5% yield. You're going to see a lot of money move out of traditional fixed income towards forms of cryptocurrency," Venuto added.

While blockchain products can be complex and often served up with a steep learning curve that can put investors off, investing in yield earning products is easier and quicker for investors to grasp. 

"I think that the yield story really is attracting new demand," Cynthia Wu, head of Business Development at Matrixport, told Investing.com in an interview Wednesday. "While investors might not really understand how high bitcoin price can go, for them it's very clear and easy to understand the interest premium."

Similar to the traditional banking business, investors can stake, or loan their cryptos like bitcoin or stablecoins like USDC, USDT, and receive yield or interest in return from borrowers. The borrowers are typically institutions or retailers that have a need to borrow. A typical borrower profile would be crypto miners, who borrow the stablecoin to pay for their basic working capital or investments into mining equipment. It is also common to find hedge fund, trading on leverage, who borrow cryptocurrency to trade.

"In order to borrow a stablecoin from platforms like ours [Matrixport], borrowers need to pledge collateral, for example, BTC or ETH with us, and at the same time they pay interest," Wu said. "This interest is [then] distributed to the investor [in the yield product]."

But there is a need to protect against the inevitable swings in the value of bitcoin and other cryptos. This is often done through a margin-call like mechanism that requests the borrower to deposit more collateral when the loan to value rises above a certain threshold.   

"[I]if we to lend out to other institutions, and take in bitcoin as collateral, the value will fluctuate because the price will fluctuate," Wu added. "If the loan to value rises to a certain percentage, then we issue margin call [requesting] the borrow to put up more margin. If they don't, then there will be forced liquidation to ensure that investor principle is protected."

But traditional investors aren't only in bonds for the yield, but for the hedge, or diversification benefits that offer protection for their portfolios when uncertainty hits the stocks.

Bitcoin, however, has received a mixed reaction when the topic of diversification is broached, particularly at a time when it has lost nearly half its value since topping $60,000. But some are quick to remind investors to ditch the short-term investment goggles when judging bitcoin.

"The premise of diversification into bitcoin is that it is going to outperform [over the long-term relative to other asset classes]," said Brad Yasar, CEO and founder of EQIFI.  "Bitcoin is an asset that has outperform all types of assets in the past 10 years." 

Bitcoin Could See Q4 Rebound as Investors Hunt for Yield
 

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Comments (18)
Jose Garcia Fuentes
Jose Garcia Fuentes Jul 18, 2021 6:10PM ET
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some say Bitcoin is literally nothing , but , that "nothing " is worth more than their fiat money 💰 .
Stephen Fa
Stephen Fa Jul 18, 2021 11:35AM ET
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When the economy crashed, the US Democrats seized its people's gold. They can't take your Bitcoin.
Jokers R Us
Jokers R Us Jul 17, 2021 10:33PM ET
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Lol
CHADWICK RICHINGTON
CHADWICK RICHINGTON Jul 17, 2021 3:43PM ET
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Bitcoin is literally nothing
William Bailey
William Bailey Jul 17, 2021 9:07AM ET
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Liquidity draining out of the markets …as soon as the stock market corrects heavily the chump-coins will go to their true value , near zero
Mohd Asmadibin Ramli Ramli
Mohd Asmadibin Ramli Ramli Jul 17, 2021 8:24AM ET
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protector gamble
Thomas Meyer
Thomas Meyer Jul 17, 2021 7:09AM ET
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Jesus how old are you people commenting? Have fun with your seven percent ROI.
Johnny Crash
Johnny Crash Jul 17, 2021 7:09AM ET
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Have fun with your 50% plus loss on gamble
Javier Escamilla
Javier Escamilla Jul 17, 2021 3:11AM ET
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No author = not reliable
Johnny Crash
Johnny Crash Jul 17, 2021 2:51AM ET
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"investors" in the same sentence as bitcoin. That is just laughable, a real hoot. Crypto is gambling, not investing
Miriam Morkhul
Miriam Morkhul Jul 17, 2021 2:49AM ET
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Retail can never win in the crypto casino. As is evident for every exchange review on appstore. Not the fake 5 star but the 1 stars. They all tell the same story. Also the SEC has a nice pile of complaints from customers who where scammed.
ZS Beck
ZS Beck Jul 16, 2021 9:31PM ET
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I'm jumping in right now.Can't wait to own some stupid numbers generated by a computer.What a great value.
Patrick Jonas
Selassie Jul 16, 2021 7:55PM ET
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I do not work harder but smarter investment shares spreading across all social medis https://www.reverbnation.com/patrickjonas
Nordin Mohamad
Nordin Mohamad Jul 16, 2021 7:38PM ET
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crypto = digital ponzi scam
Miriam Morkhul
Miriam Morkhul Jul 16, 2021 7:38PM ET
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"While investors might not really understand how high bitcoin price can go.. " True because stablecoins are printed freely in billions every day. Follow Whalealert on Twitter.
milena villa escobar
milena villa escobar Jul 16, 2021 6:24PM ET
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Ahh Bitcoin. The final frontier for millennials to prove that their tech saviness can in some way be monetized. This will not end well and you'll be left in your pants basements.
Jason brussman
Jason brussman Jul 16, 2021 6:24PM ET
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Yup. Just as silly as that stupid internet. remember the internet? That stupid tech never took off either. 🙄
Jason brussman
Jason brussman Jul 16, 2021 6:24PM ET
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Yup. Just as silly as that stupid internet. remember the internet? That silly tech never took off either. 🙄
Jason brussman
Jason brussman Jul 16, 2021 6:24PM ET
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Yup. Just as silly as the internet. Remember the internet? That silly tech never took off either. 🙄
Chris Ru
Chris Ru Jul 16, 2021 6:24PM ET
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Jason brussman is this the same internet created by the government?
milena villa escobar
milena villa escobar Jul 16, 2021 6:24PM ET
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Jason brussman  Oh you mean the dot com bubble.  yeah that internet.  you're about to get fleeced my friend
Kevin Avila
Kevin Avila Jul 16, 2021 6:13PM ET
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The reccesion is already here… demand will drop in september. The reccesion and inflation will be truly evident then. Util reality hits in september i see upside in crypto… but not much.
Dhia Betar
Dhia Betar Jul 16, 2021 6:08PM ET
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Amazing how unprofessional this article is ! So if I stake my bitcoin , and the renter of bitcoin keeps for a month, and bitcoin goes down 20 to 30 % in the month? I cant sell it m because I have loaned it, then what ? Laughable . Who edits those guys ?
Peter Murton
Peter Murton Jul 16, 2021 5:26PM ET
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The speculative mania bubble continues to inflate.  Reality check: BTC does not have a yield, period.  Of course you can loan your BTC to someone and make a deal with them that they will pay you x% interest for some duration, but you are running the risk that they will choose to just keep your BTC once you've handed it over.  Would you loan your car to a stranger on a deal like that?  It doesn't seem worth the risk to me.  Oh, and that big risk is on top of the very real risk that BTC will crater to ~0 (which is its fundamental value after all.)  Would the terms of your loan to this stranger specify that they have to return today's $31k to you, instead of the BTC's value?  Good luck enforcing that after the crash, especially when your unregistered trading partner vanishes like smoke!
James Hilliard
James Hilliard Jul 16, 2021 5:26PM ET
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how many dollars were printed out of thin air today?
Sean Brennan
Sean Brennan Jul 16, 2021 5:26PM ET
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Laughable comment, at the top, do you understand anything about markets or economics? On what are you basing this thesis ? Fundamental Value, according to what? Plummet to 0? because demand is at an all time high, Some BTC yield companies in the US are backed by US banks and insured. If you feel so strongly about this then short it. Bet you won't.
milena villa escobar
milena villa escobar Jul 16, 2021 5:26PM ET
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Sean Brennan  so what kind of a yield can I get on bitcoin if I buy it and lend it out through a US Bank as an insured transaction. Bet you don't know?  And if the Bitcoin goes down after I've lent it out who takes that loss.  Bet you don't know that either Sean.  However I'm sure that you have a deep understanding about markets and economics and that totally explains why you're into Bitcoin.
Sean Brennan
Sean Brennan Jul 16, 2021 5:26PM ET
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You still have not said anything about how BTC will go to 0 or fundamental value, the BTC lending isn't insured, obviously, but the banks are and regulated... it's common sense... so this theory that these partners are going to vanish in thin air is simply propaganda, sorry you're stuck in 1993. read.
Jokers R Us
Jokers R Us Jul 16, 2021 5:26PM ET
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This is literally word for word peter schiff. Nice plagarism.
Sol Wein
Sol Wein Jul 16, 2021 5:22PM ET
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Why you yet yield with this garbage?
 
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