| | | | | | | Presented By Gatsby | | | | Axios Markets | | By Dion Rabouin ·Jan 04, 2021 | | Happy New Year! And welcome to all of the new subscribers who signed up between Dec. 23 and Jan. 3 but never got a newsletter. I promise that's not a typical occurrence. - Was this email forwarded to you? Sign up here. (Today's Smart Brevity count: 1,165 words, 4.5 minutes.)
🎙"When you have millions of dollars, you have millions of friends." - See who said it and why it matters on the bottom. | | | | | | 1 big thing: What's driving the Bitcoin mania |  | | | Illustration: Aïda Amer/Axios | | | | Skeptics have dismissed the massive runup in Bitcoin over the past two months as another example of rampant retail trader speculation that is bound to end in tears. Driving the news: The cryptocurrency jumped from around $14,000 per coin on Nov. 3 ($10,500 as recently as Oct. 3) to more than $34,000 on Sunday, then dipped by $5,000 overnight. But this time really is different. What's happening: This time it's the institutional investors who have FOMO. - Big names like JPMorgan, Guggenheim, FundStrat's Tom Lee, hedge fund legend Paul Tudor Jones and 169-year-old insurance giant MassMutual have recently given their seals of approval, betting hundreds of millions of dollars on Bitcoin's upward trajectory and publicly touting price targets of $400,000 a coin.
- Further, involvement from Square, PayPal and Visa, which reportedly is "actively working with over 25 digital currency companies on a variety of bitcoin-related products and services," are providing a use case for the cryptocurrency.
Flashback: The price of Bitcoin crashed not long after peaking at just under $20,000 a coin in December 2017 and remained generally muted until late 2020. Between the lines: "Governments are strapped," says Douglas Borthwick, chief marketing officer and head of business development at crypto trading platform INX. - "They can't raise money to pay for things by raising taxes so instead they have to print new money."
The big picture: That has put more of the onus on central banks to stimulate their respective economies, which historically has driven down the value of fiat currencies. - Bitcoin, which isn't valued against other currencies but versus the finite supply of mined coins, is seen by many as a way to bet on the destruction of currency value globally, Borthwick notes, making it "a hedge for inflation by everyone in the world."
The intrigue: With investors believing the Fed and other major central banks will backstop or underpin markets with trillions in liquidity should bond yields rise or stock prices fall, institutions are emboldened to make bets on a risky asset like Bitcoin with little fear. - In the case of another market downturn, Fed money printing would not only clear the bond market and pump firms' stock prices, but would further juice the value of an asset with limited supply like Bitcoin.
Yes, but: That confidence from institutional investors should not be seen as a belief that a significant correction and substantial volatility are not forthcoming. The volatility is largely expected and most institutions are incorporating Bitcoin and crypto allocation at around 1% or less of assets under management. - Should a major correction happen, institutions expect to be protected from much of the fallout. Individual investors will not be so fortunate.
|     | | | | | | Bonus chart: Bitcoin goes straight up |  Data: Investing.com; Chart: Axios Visuals Bitcoin gained more than 300% in 2020, including a nearly 50% jump since crossing a then-record high of $20,000 a little more than two weeks ago. - And just four days into the new year it's already had a massive fall.
Driving the news: A "fast-paced market that has very little liquidity over the holiday break" helped drive the Bitcoin surge, Borthwick says, but a major factor also has been the fact that the big institutions moving in are buying in large quantities and no one is selling. - With firms betting Bitcoin's value can still increase by 10 times from its current level and early-stage investors in no rush to sell, everyone is on one side of the trade.
Watch this space: The value of Bitcoin is driving companies like MicroStrategy, which recently sold debt in order to purchase more of the cryptocurrency, to start adding Bitcoin to their currency reserves. Don't sleep: JPMorgan analysts in a recent note said that if pension funds and insurance companies in the U.S., eurozone, U.K. and Japan allocate 1% of assets to Bitcoin, that would result in an additional $600 billion of demand. | | | | | | | | 2. Catch up quick | | A combination of a quick bounceback for white-collar job holders, unemployment benefits that were 25 times their 2019 levels and a massive decrease in spending on services helped juice Americans' savings and gave a big jolt to financial markets. (N.Y. Times) Carl Icahn sold about $600 million of his 16% stake in Herbalife back to the company in recent days, which is estimated to have made well over $1 billion for the billionaire investor. (WSJ) Major Chinese oil companies could be removed from U.S. exchanges after the NYSE said last week it would remove China's three biggest telecoms to comply with a U.S. executive order that imposed restrictions on companies identified as affiliated with the Chinese military. (Bloomberg) Tougher lockdown restrictions are likely coming to the U.K., Prime Minister Boris Johnson said, after the country reported 54,990 new COVID-19 cases Sunday with an infection rate at almost 400/100,000. (BBC) Germany is set to extend its nationwide lockdown through the end of January despite a small dip in recorded cases last week. (FT) | | | | | | | | A message from Gatsby | | Invest in Gatsby: The app making options trading seamless | | |  | | | | Options trading is red hot right now with 2020 trading 50% above last year's level as of December. Gatsby is making options trading seamless with an easy-to-use app that simplifies options trading. Invest in Gatsby's Series A round only on SeedInvest. | | | | | | 3. How 2020 ended up |  Data: FactSet; Chart: Axios Visuals The everything rally delivered big gains to just about every asset in 2020, thanks in large part to unprecedented action from the Fed and Congress. By the numbers: U.S. equities ended 2020 higher on the last day of trading, with stocks registering strong gains — the Nasdaq rallied 44% on the year while the Russell gained 19%. - The S&P 500 and the Dow both finished the year at record highs, gaining 16% and 7% for the year, respectively.
What else: Commodities were major winners, with silver the year's top performing major asset, rising by nearly 48%. - Soybeans rose by just under 40% for the year and orange juice, copper, corn and gold all gained around 25%.
Long-dated U.S. Treasuries rose by more than 16% and an index of Treasuries maturing between seven and 10 years delivered a 9% gain. In currencies, the year's biggest gainer was the Swedish krona, which rose by around 14% against the dollar. - The dollar index declined by a little more than 7% and closed the year at its lowest level since early 2018.
| | | | | | | | 4. Car buying has changed forever |  | | | Illustration: Sarah Grillo/Axios | | | | Axios' Joann Muller writes: It took a pandemic to drag the car-buying process into the 21st century — and consumers are never going back. Why it matters: After COVID-19, consumers can now buy cars online as they do almost everything else, with the ability to complete the entire transaction digitally and take delivery without ever setting foot in a showroom. The big picture: While most other commercial transactions — even banking — went digital years ago, car-buying remained a stubbornly low-tech, often aggravating, process. - But when the public health crisis paralyzed their industry, car dealers had little choice but to embrace the disruptive changes they'd been resisting for decades.
"Consumers really like it. Surveys show they want more of it, and dealers are getting on board that this is how it's going to be," says Michelle Krebs, executive analyst at Cox Automotive. The state of play: Dealers are now touting their "omnichannel" tech strategy to provide consumers a seamless buying experience whether they shop online, in store or both. - Nissan, for example, just launched a new online shopping platform called Nissan@home that lets prospective buyers schedule a test drive, sign the paperwork and arrange delivery of their new vehicle from their computer or mobile device.
- Sonic Automotive, a large publicly traded dealer group, recently hired its first chief digital officer and vice president of e-commerce with the goal of doubling its annual revenue by 2025.
The bottom line: A three- or four-hour showroom visit can be compressed into a 15-minute online purchase. | | | | | | | | A message from Gatsby | | Invest in Gatsby: The app making options trading seamless | | | | | | | | Options trading is red hot right now with 2020 trading 50% above last year's level as of December. Gatsby is making options trading seamless with an easy-to-use app that simplifies options trading. Invest in Gatsby's Series A round only on SeedInvest. | | | | Thanks for reading! Quote: "When you have millions of dollars, you have millions of friends." Why it matters: On Jan. 4, 1935, Floyd Patterson, the youngest ever undisputed heavyweight boxing champion of the world was born. He won the title at the age of 21. - Patterson, also an Olympic gold medalist, had a professional record of 55-8-1, with 40 wins by knockout.
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