A senior Independent Reserve executive explains why family offices are allocating to Bitcoin. Initial positions typically run 2% of portfolio. Three reasons: inflation hedge against expanding money supplies, 20,000% returns over seven years versus stocks and bonds, and institutional adoption by MicroStrategy, PayPal, and DBS Bank.
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So Independent Reserve is an Australian Bitcoin and crypto exchange. We started in 2013. Our vision when we started this business, Jason, I guess, was to be the number one place for Australian and New Zealand customers to buy, sell, and secure their cryptocurrencies. Over the last 7 years, I think we've managed to do that quite well. We're one of the largest exchanges, one of the first regulated exchanges, one of the world's first insured exchanges. And we continue to step by step add more new crypto assets for our customers to trade and invest into, but also build features that, you know, that help their trading and investment experience a little bit easier and more secure. So, you know, we're right now at the cusp of, I guess, what I think is a bull market. And I think the bull markets in this, in Bitcoin, are I guess, linked to and they follow the supply halvings that happen. And the last supply halving that happened was in May 2020. And we've seen a sustained price rise over that time. The last bull market, which I guess was heavily retail dominated, we've seen a lot of infrastructure developments in this space, infrastructure for large-scale institutional investors to invest into this space, including trading and investment software, deep liquidity, liquidity providers, access to be able to ensure their holdings, better reporting software. So all of that, all of that infrastructure is now in place. So when a large-scale investor wants to invest, they can do that in a way that's compliant with their investment framework. So that's been really important. And in that time also, the regulation has developed a lot more as well. So I think previously the infrastructure and the regulation wasn't there usher in those institutional investors. And now I think it's a much more different story. And I think the macro backdrop is a lot stronger for investment into Bitcoin and crypto for institutional investors. I guess this report, we did it because we've had a lot of investors, particularly family offices in Australia, that have been speaking to us over time. Lack of information, I guess, for them to get comfortable investing into Bitcoin and crypto. And so this is something we commissioned with one of the leading research houses in the world. So I'll just share the screen for you now. In Australia, I think there are about, I want to say about 300 single-family offices and a handful of multifamily offices. So single-family office might be the wealth of a single entrepreneur or a single family, whereas multifamily office is a number of families accumulating their wealth together and they deploy the investment and risk management processes together. Okay. And I guess there are quite a handful of large multifamily offices in Australia as well. And because of, I guess, Independent Reserve's reputation and corporate governance and the fact that we are one of the oldest exchanges in the country, I mean, that, you know, we're in a unique place of trust and credibility that these family offices can talk to. So when they invest, I guess some family offices in Australia, they could be worth in the billions. Whilst that's the total value of net worth of what a family office can be worth, often the first investments a family office makes into Bitcoin and crypto, and we know this because we've had, looked after a few family offices, is usually a couple of percent. And it's only the start. We see this as a continuing trend. I think there are probably 3 really big reasons, and I think more and more families, more and more institutions will continue to go into Bitcoin. I would say hedge against inflation is the number one reason. I guess that the current situation is, you know, just about all the countries in the world right now increasing the supply of their fiat currency and reducing interest rates. And what that does is, I guess, create inflation at some point. And when that happens, we the consumer, we lose purchasing power. Whereas Bitcoin, with its hard limit, fixed supply rate, you know, is a hedge against that inflation. And it's done that pretty well. The other reason, I guess, is more from a portfolio return perspective. So if we consider, you know, equity market valuations right now, very overstretched, I would say, property markets around the world are overleveraged, fixed income returns on fixed income are probably heading to negative, so negative yields. So what that means is, as an investor and as a portfolio manager, know, where are you going to look for returns? And Bitcoin's been, I guess, the fastest growing asset class, you know, in the world for the last, well, many years. And I think if you have a look at this chart that I have here, it kind of illustrates, illustrates that pretty well. So we've got the Bitcoin price charted against, overlaid against the S&P 500, the ASX, and gold. So you can see that Bitcoin has returned about 20,000%, uh, since in the last 7 years speaks for itself really from a return perspective. And I think it's probably the third reason that there's been pretty big influx of, uh, higher net worth investors, large-scale professional investors coming into this space. There's been, I guess, um, somewhat of an institutional FOMO. So, you know, you spoke briefly about Michael Saylor from MicroStrategy He publicly invested meaningful amounts into Bitcoin. The operational capital of his fund, he bought Bitcoin and he's put it on his balance sheet. I think there'll be a lot more companies that do this, that are sitting on a large cash pile that either are getting— they're just not getting the same return on their capital. So more and more companies will look to allocate into Bitcoin going forward. The other is, you know, we've had some other well-known investors like Stan Druckenmiller, Paul Tudor Jones. We've had some other big companies that are making plays in the space like PayPal that are giving their customers and merchants exposure to Bitcoin. We've also got— we've recently heard that DBS, Southeast Asia's largest bank, is now launching a crypto exchange imminently. So, you know, all of these news stories that adding to, I guess, this, uh, this rush into Bitcoin, a $400 billion asset class, you know, all the infrastructure's there for trading, risk management, um, insurance, you know, all those things are there. So you can, you can open significant positions up without moving the market too much.
