Why It's Good News That Endowment Funds in Ivory League Universities Are Buying Bitcoin

28/01/21

Yale graduation

Higher education endowment funds in the United States backed cryptocurrencies last year according to reporting by Coindesk. The funds of Havard, Yale, Brown, and the University of Michigan all used accounts at cryptocurrency exchanges to purchase cryptocurrencies. 

An endowment fund is an investment fund set up by a non-profit organization (NPO) that uses donations as the basis for an investment portfolio with the goal of never maintaining the principal amount, while the investment income is used for immediate funding needs or to keep a nonprofit company operating efficiently

Of the universities mentioned above, Harvard’s endowment fund is the largest, with just over $40 billion in assets. Yale, U.Mich and Brown, each have endowments worth $30 billion, $12.5 billion, and $4.7 billion respectively.

The reported investments come as Bitcoin (BTC) outperformed most traditional investments in 2020, rising to set a new all-time high tipping over $40,000 just a few weeks ago. 

This is amidst a historic year for the HE sector that suffered campus closures and a large-scale shift towards online learning as a result of the COVID-19 pandemic.

A different kind of investor 

Endowment funds represent the interests of institutions made up of some of the world's brightest minds. They are known for picking their investments both wisely and conservatively. Their interest is a good indication that the smart money is backing Bitcoin.

Endowment funds typically have very long-term investment goals, this is money that is in it for the long haul unlike hedge funds representing investors who may have more short-term objectives. 

The young lead the way

Yale Graduates

Yale University graduation ceremonies on Commencement Day on May 23, 2016

The HE sector has a unique relationship with the cryptocurrency and blockchain industry. In 2018, Forbes reported that several top U.S. universities, including Cornell and M.I.T, began offering blockchain courses.

Moreover, the demographic most likely to own Bitcoin in 2020 were adults aged 18 - 34 according to Xcoins’ own data. This group included both fresh undergraduates, recent graduates, and young professionals.

Xcoins demographic data

Professor Emin Gün Sirer, and associate lecturer at Cornell University, expressed to Forbes his surprise at the 88 students in attendance during the first class of a blockchain technology course he was asked to teach. “Usually when you have five to a dozen students in such a class, you're teaching a popular class," he says. He goes on to suggest that the trend in university interest in the cryptocurrency and blockchain sector is, on the most part, led entirely by student interest.

Meanwhile, the 1st Blockchain Massive Open Online Course (MOOC) in the world at the University of Nicosia has enrolled over 30,000 students from over 80 countries.

Indication of a wider shift

When it comes to the decision to invest, the interest is part of a wider trend. 

Although the combined value of the funds mentioned above is less than $90 billion, and with only a small fraction of that likely invested in cryptocurrencies it is unlikely to generate huge market-moving impact, institutions that manage larger funds invested heavily in cryptocurrency in 2020. 

Grayscale Investments, popular for the Grayscale Bitcoin Trust, saw its assets under management (AUM) grow over 900% in 2020, almost entirely due to institutional investment in Bitcoin. Today, the investment giant owns over 4% of all Bitcoin in existence. 

The acid test

The real test will be if major businesses follow suit. If companies like Tesla with a $625 billion dollar market capitalization were to convert some of its balance sheet into Bitcoin, as it's CEO Elon Musk has publicly contemplated recently, this would likely be when the real bull run begins.

MicroStrategy has led the way in this regard, building a position in the top-cryptocurrency worth over $1 billion in 2020. 

All in all, wherever you look, institutions and businesses are interested in the cryptocurrency market like never before. If that interest continues to grow, so too will the cryptocurrency and blockchain industry. 

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