In recent months, there has been a considerable increase in institutional demand for Bitcoin (BTC) after several high-profile investments. Over time, 10T Holdings asset manager and co-founder Dan Tapiero believes this could lead to a problematic BTC shortage.
Along with investments from Square, MicroStrategy and Stone Ridge, they increased Bitcoin purchases for the Grayscale Bitcoin Trust.
Based on the rapid growth of institutional investments, Tapiero warns that short sellers may see problems in the future.
Institutional investors rush to Bitcoin
In the third quarter of 2020, the Grayscale Bitcoin Trust recorded an inflow of $ 1.05 billion. This marked the company’s first quarter of billions of dollars and also highlights record institutional demand. The company’s quarterly report explains:
“Grayscale recorded its largest quarterly inflows, over $ 1 billion in the third quarter of 2020, making it the third consecutive record-breaking quarter. Year-to-date investment in the Grayscale product family exceeded $ 2.4 billion, more than double the cumulative inflow of $ 1.2 billion in 2013-2019 products. “
The moment of the record quarter at Grayscale is remarkable because it occurs several months after the price of BTC has dropped to less than $ 3,600.
Quarterly entries in Grayscale funds, including Bitcoin. Source: Grayscale
On March 13, Bitcoin fell $ 3,600 after the settlement of $ 1 billion futures contracts. BTC has been recovering steadily since then, eventually rising above $ 12,500 in early September.
Institutional demand for Bitcoin has increased rapidly after what is now known as one of Bitcoin’s sharpest declines in recent history and this indicates that institutions see the staying power.
Considering the steady increase in the gray-scale inflow of institutional investors, Tapiero said:
“Bitcoin SCARCITY is possible. The Grayscale Trust is devouring BTC as if there is no tomorrow. If 77% of all recent miners become 110%, the lights are off. The supply of non-miners will be kept out of the market under pressure. Short positions will be dead. The price can go to any number. “
Concern about supply after halving
Speculation about a potential supply-side crisis around Bitcoin also coincides with the post-halving cycle. Bitcoin went through its third halving on May 11 and, historically, reward reductions have led to a long jump in the next two years. .
Halving has been proven to have a direct impact on the price of BTC, especially in the long term, as the rate at which the remaining supply of BTC is introduced to the market slows down.
Bitcoin has a fixed supply of 21 million, and with each halving, the number of BTC miners can suffer from cuts. Consequently, less BTC are available on the market for purchase every four years.
In 2016, Bitcoin took about 15 months to peak after the second halving. If a similar pattern follows, a year from the most recent halving would be around the third quarter of 2021.
Coincidentally, the current cycle is being met with an unprecedented institutional demand.