Didi Taihuttu, his wife, and three kids bet all they have on bitcoin.
In 2017, CNBC spoke to the Dutch family of five when they were in the process of liquidating their assets — from a profitable business and 2,500-square-foot house, to their shoes — and trading it all in for the popular cryptocurrency and a life on the road.
Nearly four years and 40 countries later, Taihuttu and his family still don’t have bank accounts, a house, or all that much by way of personal possessions. All of the family’s savings remain tied up in highly volatile cryptocurrencies.
“We stepped into bitcoin, because we wanted to change our lives,” said the 42-year-old father of three.
When the price of bitcoin collapsed in 2018, Taihuttu added more to his investment portfolio. He says he was always a firm believer that the cryptocurrency was poised for a major rebound. “I think in this bull cycle, we are going to see a minimal peak of $100,000. I won’t be surprised if it hits $200,000 by 2022.”
I won’t be surprised if [bitcoin] hits $200,000 by 2022.
The price of bitcoin reached an all-time high on Monday, as it closed in on $20,000. And some analysts say the cryptocurrency still has a lot of room to run higher.
Mike Novogratz, CEO of investment firm Galaxy Digital, thinks this comeback rally is only just getting started. He sees bitcoin rising to $60,000 by next year.
And Tom Fitzpatrick, global head of CitiFXTechnicals, said the charts signaled that bitcoin could reach $318,000 by December 2021, in a report meant for Citibank’s institutional clients and obtained by CNBC.
Why this isn’t another bubble
Taihuttu bought the bulk of his bitcoin holdings when it was was trading at around $900 in early 2017, just months before bitcoin reached nearly $20,000 a coin.
Even as bitcoin peaked, the family stayed invested in the cryptocurrency. Once the bubble burst, and the price tumbled down to about $3,000 in early 2018, Taihuttu and his family weren’t deterred. “When bitcoin dipped, we started to buy more.”
When I asked Taihuttu on our Skype call whether he was worried that we could be in the midst of another bitcoin bubble, he doubled down on his investment. “I don’t see demand going down,” he added. “I think we’re headed for a supply crisis.”
Part of what’s different about bitcoin’s rally in 2020 versus 2017 is that institutional investors are now adopting bitcoin, lending it newfound legitimacy and helping to erase the reputational risk of investing in the cryptocurrency.
“The 2017 rally was largely driven by retail investors, whereas this year we’re seeing a massive influx from corporate entities and institutional money managers,” said Mati Greenspan, portfolio manager and founder of Quantum Economics.
Old-school, billionaire hedge fund managers Stanley Druckenmiller and Paul Tudor Jones now own bitcoin and big fintech players like Square and PayPal are also adding crypto products.
This kind of mainstream adoption is hugely important, because cryptocurrencies like bitcoin aren’t backed by an asset, nor do they have the full faith and backing of the government. They’re valuable because people believe they’re valuable. So it goes a long way when bitcoin gets buy-in from some of the biggest names on Wall Street.
Bitcoin’s supply crisis
The surge in interest from mainstream financial players hasn’t just reformed bitcoin’s image; it’s also fomented a supply shortage.
“The basic reason for the two rallies are the same,” Greenspan said. “It’s a matter of digital scarcity. There is a strictly limited supply of bitcoin available in the market, so when everyone is buying and nobody is selling, it can cause tremendous upward pressure on the price. What’s different this time are the players involved.”
The 2017 rally was driven by retail speculation, and in 2020, it’s the billionaires and corporations that are buying bitcoin en masse.
“When PayPal starts to sell bitcoin to its 350 million users, they also need to buy the bitcoin somewhere,” said Taihuttu. “There will be huge a supply crisis, because there won’t be enough new bitcoins mined everyday to fulfill the need by huge companies.”
And that interest from institutional investors doesn’t appear to be slowing down. Six out of 10 investors surveyed by Fidelity in June believe digital assets have a place in investment portfolios.
Are retail investors missing out?
Mike Bucella, BlockTower Capital general partner, told CNBC in an interview on “Power Lunch” that retail investors are actually the ones missing out on the bitcoin rally this year.
“If you dig a layer deeper in the derivatives market, you notice that most of that derivatives flow has transitioned from the crypto native exchanges of 2017 to institutional products, like the CME,” said Bucella. “I think this really firmly indicates that retail actually missed out on this rally this year. It’s been primarily and firmly an institutional bid.”
But not all retail investors are missing out.
Taihuttu put a couple hundred thousand dollars into cryptocurrency in 2017, while the price of bitcoin was still trading lower, and he has mostly stayed all in on his investment.
Despite 2020’s massive returns and all the recent bullish calls around bitcoin price targets, the fact remains, a speculative asset like bitcoin remains prone to seismic price moves in a very short space of time.
In 2018, the massive sell-off in cryptocurrencies, including bitcoin, was swift, brutal and worse than the bursting of the dot-com bubble in 2002.
2020 may look different to 2017’s rally, but as an asset, bitcoin behaves in a cyclical manner. Each successive high is higher, and the lows are not quite as low, but bitcoin is certainly not immune to another major correction.
Though for Taihuttu, the bitcoin play isn’t all about making a profit. He’s already given half of his money away to charity, and his family of five has spent the last four years traveling the world, in order to spread the gospel of decentralized digital currencies.