The craziness of it. Bitcoin has been storming up and down, from $20,000 to $6,000 and back to $11,000 again. This volatility makes most traders’ stomachs churn, their faces go pale and their palms start to sweat. As if this action weren’t enough, an unknown trader has put their money where their mouth is – all $400 million of it. One can’t help but wonder what in the market justifies such an extreme move. On the Fortune website, we read:
An anonymous trader has sunk $400 million—enough to buy New York state’s most expensive home twice with change left over—into the cryptocurrency, raising his or her stake from 55,000 coins to more than 96,000 between Feb. 9 and Feb. 12. And that buy-in is already paying substantial returns.
The bulk of the purchases took place on Feb. 9, with another 9,000 or so on Feb 12, according to publicly available data tracked by digital wallet provider Blockchain. And even if the buyer bought at the day’s peak, he, she, or it is looking at total gains so far of roughly $83 million.
The current value of the buyer’s portfolio currently stands at nearly $1.1 billion.
Whoever the investor was, it wasn’t his or her first time plunking down a lot of cash on Bitcoin. Their account was largely dormant before Dec. 12, when it went from holdings of 0.246 coins to 48,627 by the morning of Dec. 13. (Bitcoin, at the time, was going for about $17,000—meaning a rough investment of $827 million.)
The sheer size of the position makes it highly unlikely that it’s just an individual trader behind the buy. An initial investment of $800 million followed by another one to the tune of $400 million would suggest an institutional buyer but let’s not forget that mutual funds, pension funds and similar institutions are constrained by law in their choice of investable assets. This leaves us with unconstrained entities, the most prominent of which are hedge funds and family offices. “Hedge funds” is an umbrella term for funds which take outside money from investors with substantial assets. They can invest without constraints imposed on mutual funds, which means they could potentially buy Bitcoin. Family offices are similar but they don’t take outside money but rather manage a portfolio of one individual or a whole family (hence the name). So, hedge funds and family offices are natural candidates for the mysterious buyer of Bitcoin.
