BlackRock’s Fink Declares Bitcoin a New Asset Class, Italy Raises Capital Gains Tax on Bitcoin, Over Half of Government Spending Locked In by Law
BlackRock’s Fink Declares Bitcoin a New Asset Class, Italy Raises Capital Gains Tax on Bitcoin, Over Half of Government Spending Locked In by Law
News Block #58 (10/17/2024)
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BlackRock’s Fink Declares Bitcoin a New Asset Class
Looking back, I truly believe 2024 will be viewed as the year when it started to become a reputational risk to not own at least a little bit of Bitcoin. As Saylor said, the Institutional adoption wave is here.
Gone are the days when financial advisors and portfolio managers could brush Bitcoin off as a bubble or fad. Clients now expect them to have an educated opinion, and they should.
The data speaks for itself. Bitcoin was the best-performing asset class last year and is again gunning for that title this year. Since 2013, it’s had an annualized return of more than 130%!
Legacy financial institutions are starting to echo what Bitcoiners have been saying for years: Bitcoin isn’t risky—it protects investors from currency debasement and economic instability.
JP Morgan recently said this in a report when it called Bitcoin the “debasement trade.”
And then there’s BlackRock, promoting Bitcoin to institutional investors as a hedge against declining trust in fiat currencies.
If you had told me last year that BlackRock would be giving global presentations discussing the decline of the dollar’s purchasing power along with a table highlighting Bitcoin’s strengths as money, I wouldn’t have believed you, but here we are.
On BlackRock’s Q3 Earnings Call, Larry Fink was asked about their digital asset strategy, and he replied that he believed Bitcoin was “an asset class in itself” and said he doesn’t think the outcome of the coming election really makes a difference with Bitcoin.
Fink went on to compare Bitcoin to the early days of the mortgage or high yield debt markets in the 1980s as they were emerging as new asset classes. He did NOT say that Bitcoin is going to be bigger than the housing market. This quote turned out to be misinformation. But essentially, his message to investors was clear: If you think you're late to Bitcoin, you're actually still very early.
He thinks Bitcoin just needs better liquidity, analytics, and data before it gains more acceptance. Once that happens, he said he “truly believes the market will broaden.”
To sum that up in one sentence, Bitcoin has become a legitimate asset class, but it’s still in its early days and poised to grow.
BlackRock is essentially on a world tour delivering the Bitcoin message. When these large institutional investors—think pension funds, family offices, hedge funds, and endowments—hear Bitcoin talking points coming from one of the largest asset management firms in the world, they react a little differently than someone on X.
And given the results from several recent surveys, the message appears to be landing too.
A survey from the Alternative Investment Management Association found that 47% of hedge funds had exposure to digital assets, and 43% of them are seeing increases from their institutional clients.
Another survey from Charles Schwab found that the number one asset class millennial ETF investors plan to invest in are “Cryptocurrencies.
In addition, the same survey discovered that the asset class was the second most popular amongst all ETF investors.
Today, we stand at an inflection point in Bitcoin’s adoption. BlackRock’s Bitcoin ETF has surpassed $10 billion in assets under management faster than any other ETF that has been launched in the last 10 years, and it’s not even close.
Institutional demand is clear and growing, and it’s poised to make this Bitcoin cycle different from anything we’ve seen before.
To learn more about the growing Wall Street fever over Bitcoin, check out the latest Coin Stories interview this week with Anthony Scaramucci, which already has nearly 300,000 views on X alone. There’s also a viral clip shared about Mooch and Michael Saylor that you don’t want to miss.
Italy Raises Capital Gains Tax on Bitcoin
When we look to the future, we’ve got to ask ourselves, is more currency debasement coming our way? And what does that world look like?
With the historically high debt levels we’re seeing, I think the answer is a pretty clear ‘yes.’ It’s just the easiest way out for these governments. But that doesn’t mean they won’t try other methods first, like raising taxes, to clean up their balance sheets.
When governments become buried in debt, they usually turn to their citizens to pay for their reckless spending, whether through higher taxes, inflation, or both. We got a glimpse this week when Italy announced it’s raising the capital gains tax on Bitcoin from 26% to 42%!
A little background here—Italy’s debt-to-GDP ratio currently sits at 134%, making it one of the most indebted countries in Europe.
The Italian tax authority justified this increase by saying, “The Bitcoin phenomenon is spreading.”
Well, they’re definitely not wrong about that, but the Italian government doesn’t seem to understand that capital and labor are mobile in today’s world.
If they overtax their citizens, those people might be encouraged to pack up and move their capital to a country that treats it better. This is especially true if they are storing their wealth in digital money.
This capital flight is exactly what we saw happen in Norway last summer. The government increased its wealth tax, and capital flew away. Instead of the tax increase bringing in an additional $146 million in revenues as the government expected, individuals said, “See ya!” and took $54 billion of their wealth with them.
So, by raising its wealth tax, Norway ended up losing $448 million in tax revenues as people moved away. Ouch.
Stacy Herbert responded to the news out of Italy, tweeting:
Tax hikes on Bitcoin are something to watch. As these heavily indebted governments become more desperate for tax revenues, Bitcoin could get caught in the crosshairs. But the beauty is that people can always vote with their feet and move to places with more friendly tax treatment.
However, tax hikes will not solve these countries' debt problems. Take the U.S., for instance…
AllianceBernstein recently published a report that found that even if all of Biden’s proposed tax hikes were passed into law (which will never happen), they would only lower the projected debt-to-GDP ratio from 175% to 150% by 2054.
Tax hikes would only put a small dent in the debt. And that’s not even taking into account that the government is historically not the best allocator of capital (why? because there’s zero accountability), and more taxes mean slower economic growth. This only leaves the government with one real option: debase the currency. This is the “hidden tax.”
This actually reminds me of a conversation we had with economist Daniel Lacalle, which will air on Coin Stories very soon. He made a strong case that tax promises are just a cover for politicians to keep printing money, and after seeing the AllianceBernstein report, it’s hard to argue against his theory. Keep an eye out for that interview in the coming weeks.
Over Half of Government Spending Locked In by Law
Despite major financial institutions backing Bitcoin, the spot Bitcoin ETFs having the most successful ETF launches of all time, and Bitcoin being the sixth largest monetary asset in the world ahead of the British pound, people like Minneapolis Fed President Neel Kashkari still say this week that Bitcoin “holds no value.”
A quote from Upton Sinclair comes to mind, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
As the Bitcoin phenomenon continues to spread, expect more dismissive comments like this from government and fed officials, but the truth is, in many ways, “the seeds are sown.”
Apollo Global Chief Economist Torsten Slok recently shared a chart showing that mandatory spending–aka social security, Medicare, and Medicaid–now accounts for around 60% of government spending, up from 30% in the late 1960s.
Why does this matter?
This mandatory spending is “baked in the cake.” The government is legally required to allocate to these entitlement programs, meaning without some change in legislation, a majority of the government spending will continue. This leaves politicians with limited flexibility to balance the budget, which means the deficits will likely grow as these entitlements grow with our aging population. The end result? More deficit spending, more debt, and more inflation.
The stage is set: Governments worldwide are struggling to manage their finances. They will try to raise taxes. They will promise to cut spending. They will try to discredit monetary alternatives like Bitcoin, but the reality is that they need to keep running massive deficits and debase their currencies to keep the current system afloat.
If there are two things I am sure of, it’s that fiat currencies will continue to be debased, and Bitcoin will continue to remain fixed.
Choose your money wisely.
Until next week, keep stacking.
- Sam & Nat
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NEW: Anthony Scaramucci: Why Bitcoin is the Best Investment Idea
In this episode with Anthony Scaramucci, Skybridge Capital founder and managing partner, we discuss:
Why Bitcoin is the best investment idea for both Wall Street and the retail community
How the 2024 election outcome may impact Bitcoin
Reaction to Trump Embracing Bitcoin
Why the current administration has been so hostile to the Bitcoin industry
Bitcoin's next catalyst for major expansion
Bitcoin was at these prices in 2021...how does Anthony measure its progress?
Anthony's upcoming Bitcoin book
Will Bitcoin be the People's Money, or is it at risk of being captured by legacy corporations?
Make sure to listen to my latest Coin Stories episodes, including Matthew Lysiak, Larry Lepard & James Lavish, and U.S. Rep. Ro Khanna.
Listen on Fountain and Earn Bitcoin: Click here
Listen on Apple Podcasts: Click here
Listen on Spotify: Click here
Listen on YouTube: Click here
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Links to Items Mentioned in this Issue
JP Morgan Chase Calls Bitcoin “Debasement Trade”
BlackRock’s Recent Report on Bitcoin
Larry Fink Calls Bitcoin an Asset Class
Charles Schwab Survey on ETF Investors
AIMA Survey on Institutional Interest in Digital Assets
Aspen Digital Survey on Asian Family Offices
Bitcoin ETF Holdings on Pace for One Million BTC
Asset Classes Compared by Market Capitalization
AllianceBernstein Report on Debt and Taxes
Italy Raises Capital Gains Taxes on Bitcoin
Norway Wealth Tax Increase Causes Capital Flight
Bitcoin is 6th Largest Monetary Asset in the World
Apollo Global Shows 60% of Spending Is Mandatory