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Institutional investors buy BTC like crazy after halving it

May 23, 2020

Both data and first-hand reports from industry experts show that interest in Bitcoin (BTC) is rapidly increasing among institutional investors. This has led some to conclude that the “perfect storm” is about to enter the market.

GBTC BTC Holding  Assets Under Management. Source: Cointelegraph, grayscale.

GBTC participations and assets under BTC management. Source: Cointelegraph, grayscale.

The price doesn’t matter

Institutional investors buy BTC like crazy after halving it
Institutional investors buy BTC like crazy after halving it

The Grayscale Bitcoin Trust (GBTC), a listed vehicle supported by Bitcoins, has grown steadily in size in recent years. However, growth has accelerated in recent months. Interestingly, the price fluctuation of the underlying does not appear to affect this growth pattern. This makes sense when you consider that investors have a blocking period of at least six months.

Daily change of GBTC BTC Holdings  BTC price change. Source: Cointelegraph, grayscale.

Daily change in GBTC BTC holdings and BTC price change. Source: Cointelegraph, grayscale.

Grayscale can consume 550,000 BTC by 2021

What makes GBTC an important driver of market dynamics is not only the fact that, according to his spokesman, more than 90% of the contributions come from institutional actors.::

“Right from the start, 90% of the inputs for our product family came from institutional investors.”

But their holdings are also reducing Bitcoin’s current offering as their assets are locked into Coinbase’s vaults. To date, GBTC has withdrawn 350,000 BTC from circulation. This corresponds to 2% of the circulating Bitcoin supply, regardless of the amount of coins lost.

Daily emission of BTC and consumption of GBTC. Source: Cointelegraph, grayscale.

Since 2019 GBTC consumed 100,375.93 BTC, which corresponds to 17% of all bitcoins mined during this period.

GBTC 100-day BTC acquisitions and forecast. Source: Cointelegraph, grayscale.

100-day GBTC BTC acquisitions and forecasts. Source: Cointelegraph, grayscale.

The rate at which institutional investors have invested in GBTC has tripled over the past three months. If this trend continues, it will hold 400,000 BTC in another three months, and in another six and a half months later, in March 2021, it will accumulate around 550,000 BTC, or 3% of the total supply.

Even if this forecast is met, This means that GBTC will access 75% of all newly mined bitcoins during this period.

Credit platforms cannot satisfy institutional surpluses

It is not clear whether this trend was stimulated by halving, but the metric itself is confirmed by other sources. Alex Mashinsky, CEO of Celsius, the 55,000 BTC cryptocurrency lending platform, told Cointelegraph:

“Now we have more than 260 of them [prestatarios institucionales] Since its inception, we have made $ 10 billion in loans. The price of BTC doesn’t matter, what matters is the volatility of prices that go up and down. “

He added that he could easily lend another 100,000 BTC if he had it; This is despite the fact that Celsius calculates an annual interest rate of 5 to 12 percent.

Zac Prince, CEO of BlockFi, another cryptocurrency lending platform, told Cointelegraph, although the company has not released its data publicly that it expects institutional interest to increase further:

“The volatility that some people consider to be a risky investment under normal market conditions has now allowed him to recover faster than any other asset after the initial market downturn in March: it has now risen 94% on March 16. March and continues to rise. We look forward to continuing to see strong institutional interest in this asset in the coming years, accompanied by broader consumer acceptance. “

It’s important to note that unlike grayscale, platforms like Celsius and BlockFi are unlikely to raise the price as they won’t pull their bitcoins out of circulation. on the contrary, they promote liquidity in the market.

Another supply-side improvement to the equation is expected to result from the mining industry cleanup.. If inefficient miners leave the network, the rest will be more profitable and will be able to sell fewer bitcoins to keep operations running and reduce supply.

Perfect storm

Matt D’Souza, CEO of Blockware Solutions and manager of a Bitcoin hedge fund, told Cointelegraph:

“Most funds and Hodler don’t keep short strategies. They all go with long strategies. Most funds are long. My butt is only long. I manage 15 million and I would say that we are a reasonably sized fund. <...> I received a call to MultiCoin two days ago. I had a call to BlockTower last week. So I fight with all other funds. And is that for the most part, everyone has only long strategies for Bitcoin.

He believes that The combination of central banks bringing trillions of dollars into the economy and the drop in new bitcoin spending due to halving creates a “perfect storm”:

“They inject two billion. Maybe they have to inject more depending on how the economy is doing. <...> A lot of money is injected. And it creates a perfect storm for Bitcoin. “

Bloomberg analyst Mike McGlone believes that The general assumption will result in the SEC’s approval of an electronically traded Bitcoin Fund (ETF) in the near future:

“Open interest rate futures are becoming increasingly common and indicate the likelihood of an ETF future in the US listed market.”

If this trend continues, the data seems to indicate that the price of Bitcoin could rise in the next 12 to 18 months. How D’Souza summed it up:

“What drives the price is the daily inflow and outflow of net fiat. Bitcoin trades with a volume of a few billion that does not move the price. “