Bitcoin is becoming increasingly popular with institutional investors. It is a story that has been hanging over the market for several years, but seems to be coming true in 2020.
Names such as PayPal, Citibank and BlackRock support Bitcoin’s narrative as a weapon against dollar inflation.
Institutions are pushing up the Bitcoin price.
That is one of the conclusions of the report ‚Flows & Liquidity‘ by three analysts at JPMorgan. The authors are Nikolaos Panigirtzoglou, Mika Inkenen and Ekansh Agarwal, who operate from an office in London.
They see that institutions are taking Bitcoin at a faster pace compared to the previous quarter. They see that these parties are more active than advisors in the derivatives market.
This implies that the current rally has been mainly driven by buying Bitcoin for the long term. And that short-term speculation is, for the time being, losing out.
A statistician like Willy Woo already concluded last month: this increase has been borne by the spot market and less by the derivatives market. However, this time it is not the retail investors who are dominating, but the larger funds and companies.
Grayscale and Square
Eye-catching is the flagship of the market: Grayscale Investments, the asset manager owned by Digital Currency Group (DCG).
With the Grayscale Bitcoin Trust (GBTC) they operate an exclusive Bitcoin trust, in which institutions can acquire a stake.
Quarter three was mainly the quarter of Square, which sold 1.6 billion dollars to Bitcoin through its Cash App. But in quarter four, more than 300% more Bitcoin flows into the Grayscale trust than in the previous quarter. In total, the trust holds more than 480,000 BTC.
In fact, it is more popular on Wall Street than investing in gold ETFs, for example, notes Bloomberg analyst Mike McClone.
In an interview with The Block, managing director Michael Sonnenshein says:
We ran the „Drop Gold“ campaign earlier this year. We see that the investment preferences of the younger generations are different from those of the baby boomers. There is a shift in the market‘.
Last month PayPal joined this group of influential buyers. CEO Dan Schulman of the payment giant describes Bitcoin as a means of payment. Because of their Bitlicense, the company is also obliged to cover every Bitcoin they offer with physical Bitcoin.
In short, PayPal is forced to move into the spot and over-the-counter market and purchase Bitcoin. A market analysis by Pantera Capital shows that PayPal, together with Square, buys much more Bitcoin than new Bitcoin is added every day.
Miners mine around 900 fresh bitcoin every day. As of 2024, this daily increment will be halved to 450 a day. By the end of 2025, approximately 95% of all Bitcoin stock is expected to be mined.
The fact that more and more large buyers are manifesting themselves on the market is leading to increasing scarcity on the market. This could be a trigger that will cause the price to rise further.