Bitcoin gains in popularity with family offices, billionaires

Mimesis Capital, a new family office based in Taiwan, is parking its cash in bitcoin, while seeking to increase its investment weighting in the cryptocurrency.  Elsewhere, MicroStrategy, a US software provider, has become the first listed company to switch a majority of its cash reserves into bitcoin.

Louis Liu is chief investment officer of a Mimesis Capital. He says he intends to invest 95% of its treasury assets into bitcoin, comparing its beauty to a Leonardo da Vinci portrait.

“A Leonardo is very scarce.  And so is bitcoin, because there can never be more than 21 million. My father agreed we should invest in bitcoin, because he is in the art world and understood the value of scarcity. When bitcoin rose in value, he liked the idea even more.”

Liu believes fiat currencies will plunge in value, as governments print more and money to revive their economies because this appears the easiest way to meet their obligations. Following the eruption of the Covid-19 pandemic, he has doubled down on bitcoin, believing the crisis will lead to excessive money printing and financial instability.

“Globalisation is already finished. We are entering into something more like nationalism, more local.”  He is very aware of the tension between Taiwan and China but believes bitcoin can be a hedge against uncertainty, while becoming a global currency in its own right.

Liu currently allocates 10% to 15% of Mimesis’ investment portfolio to bitcoin, depending on the value you put on its art.  Mimesis also invests in real estate and venture capital. He believes equities are completely detached from fundamentals, making bitcoin the best route to preserving his family’s fortune.  

After opening his first brokerage account at 14, with permission from his parents, Liu soaked up investment theory and become involved in several start ups, often involving bitcoin. He is venture capital partner at advisory group Alpha Square and adviser to Magi Capital, a Taiwan private equity firm.

Liu is ready to use Mimesis real estate as collateral for more bitcoin purchases. He is inclined to sell some of the art owned by Mimesis, partly because it can be illiquid. But stresses this needs to be a family decision. As well as advisory work, it has developed one of the largest art media companies in Asia, drawing on twenty years of data. Its main publication is Chinese Art News.

Over at MicroStrategy, chief executive Michael Saylor owns 73% of the company, valued at $1.5 billion on the stock market. He likes to be seen as a futurist, forecasting the crucial importance of mobile phones and tablets in 2012. 

In August, MicroStrategy invested $250 million in bitcoin. In mid-September, it invested another $175 million.

It previously parked the cash in short-term US government securities but Saylor is wary of dollar weakness and a sharp rise in inflation following Covid-19. He told Bloomberg: “We really felt we were on a $500 million melting ice cube.”

MicroStrategy considered investing in gold, but took prospective returns would be diluted by mining activity.

In contrast bitcoin’s creator, Satoshi Nakamoto, laid down a policy from the outset which meant its units would never rise in number beyond 21 million. 

Bitcoin bulls are encouraged by news of the cryptocurrency being used as a treasury asset. But it has yet to capture significant business from mainstream investors, largely due to the volatility of its price. 

So far this year bitcoin is up 50% to nearly $10,500 but well below the $19,300 struck in 2017. Movements of 5% in a week are not uncommon. 

Rival cryptocurrencies are gaining in popularity, potentially undermining support for bitcoin. Etherium, for example, has risen by nearly 160% to $340 this year.

However, Saylor believes bitcoin is the soundest crypto-currency by a considerable margin: “Bitcoin is digital gold – harder, stronger, faster and smarter than any money that preceded.” Louis Liu says bitcoin has become sufficiently well-established, and liquid, to become the default option for investors trying to choose between a range of options.

Several family offices are becoming more inclined to view bitcoin as a safe haven, which can be owned direct, without the involvement of intermediaries, as reviewed by Family Capital in May. 

Family offices often own gold bullion, as opposed to gold ETFs which involve intermediaries. Recent revelations relating to the way banks have continued to process illicit funds for favoured clients has undermined their reputation still further. 

Unchained Capital is a bitcoin financial services business which has started to offer companies and family offices ways to invest directly in bitcoin. Over time, Mimesis hopes to advise other family offices on the use of bitcoin.

Elsewhere, Kraken Financial is a pure crypto-currency specialist, which has been granted banking status by the US State of Wyoming.  

Kraken’s managing director is David Kinitsky, vice president of innovation at Fidelity Investments prior to 2018.  Fidelity confirmed its launch of a bitcoin fund for family offices and other wealthy investors over the summer.