- There are now more institutions than ever before expressing interest to hold Bitcoin
- New trend of institutional investment will continue as there various instruments backed by Bitcoin emerge
- MicroStrategy holds 71,079 BTC in reserve, equivalent to over $3 Billion
- Institutional investors play the role of influencing retail investors to adopt Bitcoin
Investment trend of Bitcoin (BTC) has changed drastically where, institutions and institutional investors have been acquiring bitcoin at a faster rate in 2021 than ever before which has now resulted in nearly 4% of all bitcoin circulating supply being locked up by institutional investors.
According to Henri Arslanin, PwC’s global crypto leader, “Bitcoin’s record-smashing rally seen in last few weeks was partly driven by the entry of more large, institutional investors into the market.” There are now more institutions than ever before expressing interest to hold some of their cash or treasury in bitcoin.
Even though the cryptocurrency has been around for a little over a decade, but it only began to rise in popularity among mainstream institutional investors last year. Many market analysts believe that this trend will continue to be in future as there are various instruments that would facilitate their investment on Bitcoin.
According to CryptoQuant, South Korean blockchain analytics firm, have indicated that most of the Bitcoin transactions conducted through their network was done through over-the-counter (OTC) deals, which is a preferred approach by institutional investors.
Major institutions that have adopted Bitcoin as a reserve asset
Large financial companies like PayPal and Fidelity have also made moves in the cryptocurrencywhile the likes of Square and MicroStrategy have used their own balance sheets to buy bitcoin. While retail interest in Bitcoin has also improved equally, with news of Tesla’s $1.5 billion Bitcoin investment rallying the price of Bitcoin.
MicroStrategy, a prominent business analytics platform, has adopted Bitcoin as its primary reserve asset. Where they have been a large BTC buyer during the dip occurred in January 22nd. According to CoinDesk, MicroStrategy announced that it bought 314 more BTC for $10 million during the latest market sell-off.
In February 2021, the firm which produces mobile software and cloud-based services continued its Bitcoin buying spree with a purchase of 295 BTC; it now holds 71,079 BTC in reserve, equivalent to over $3 billion in BTC.
CEO of MicroStrategy Micheal Saylor revealed that he holds 17,732 BTC currently worth over $830 million. As per data from BitInfoCharts, this positions Saylor among the top 100 Bitcoin owners assuming it is all held within a single address.
Electric vehicle manufacturer Tesla has joined the ranks of companies holding Bitcoin, with an SEC filing showing that the company has invested a total of $1.50 billion in the cryptocurrency. The investment amounts to around 7.7% of Tesla’s $19.384 billion cash holdings, as of Q4 2020.
According to the SEC filing, Tesla’s Bitcoin purchase reflects an updated investment policy aimed at diversifying its cash on hand and maximizing returns. The filing states that, “we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds and other assets as specified in the future.”
Tesla also revealed that it expects to begin accepting Bitcoin as payment for its products “in the near future,” leaving open the question of whether it will liquidate or continue to hold the cryptocurrency upon receipt of payment.
Grayscale Bitcoin Trust
Grayscale Investments is undoubtedly one of the biggest names in the Bitcoin space. Grayscale has by far the largest Bitcoin portfolio of any institutional investment platform, with over $30 billion in BTC currently under management in the Grayscale Bitcoin Trust, which trades under “GBTC”.
In total, Grayscale Investments now holds more than 3% of the Bitcoin total supply, with 656,166 BTC currently under management across its Grayscale Bitcoin Trust and the Grayscale Digital Large Cap Fund, according to bitcointreasuries.org.
Last year October, the Jack Dorsey Square Inc., the New York Stock Exchange-listed mobile payments firm announced it spent $50 million buying 4,709 BTC. In other words, they have moved one percent of its total assets into BTC.
According to Amrita Ahuja, chief financial officer of Square, “bitcoin has the potential to be a more ubiquitous currency in the future…. as it (BTC) grows in adoption, we intend to learn and participate in a disciplined way. For a company that is building products based on a more inclusive future, this investment is a step on that journey.”
Square made another colossal investment in Bitcoin during last week of February, more than tripling its last investmen with a $170 million purchase of BTC. The company purchased about 3,318 bitcoins at an average price of $51,236, which signals remarkable confidence in BTC.
Coinshares Ltd is a UK based investment fund that is primarily focused on direct and indirect exposure to bitcoin and other cryptocurrencies. The company is one of the earliest pioneers in digital asset investments, also joins the list of public companies managing substantial Bitcoin assets.
As of February 2021, CoinShares’ assets under management include 69,730 BTC, which worth more than $3.2 billion. CoinShares’ investment represents over 0.3% of the current Bitcoin circulating supply.
Coinshares was the first firm to launch a regulated Bitcoin hedge fund and exchange-traded Bitcoin product. Through its subsidiary XBT Provider, Coinshares offers two globally traded exchange-traded notes (ETNs) in BTC and ETH, Bitcoin Tracker One and BTC Tracker Euro, and ethereum, Ether Tracker One and ETH Tracker Euro, respectively.
What does this mean for Bitcoin?
The massive accumulation of Bitcoin by large corporations is undoubtedly going to cause scarcity in the long run and this scarcity can send the price of BTC even higher. The interest from these big players has also enticed the very conservative institutions who are now gradually entering the game, a move that is creating enormous demand in the crypto space.
Another crucial fact is that, These institutional investors also play the role of influencers, with the capability of driving the mainstream adoption of BTC. Where they can encourage other smaller dependent institutions or retail investors that are affiliated with them to consider taking a BTC position.
The investment activities of institutional investors are marked by a seemingly longer-term position. The tax obligation on big corporations investing in Bitcoin usually makes a one-year investment non-lucrative.
Many investors who intend to keep their Bitcoin position for about one to three years are also embracing the crypto lending services (taking loans against cryptocurrencies, specially BTC) to provide short term liquidity, while also benefiting from the future surge in the price of BTC.
As institutions are getting into Bitcoin and adopting lending as their instrument, the future of Bitcoin looks even brighter. Considering the growing scarcity of BTC, and the desire to keep long-term positions by the big institutional investors, it can be seen that more and more Bitcoins locked in Collateral-Debt-Positions.
CEO of NYDIG, Ross Stevens, who is a a leading provider of institutional investment, brokerage, treasury and technology solutions to banks and private clients, stated that “a year ago we had 25 institutional clients… today 280. By the end of year, I’m confident we’ll have over $25 billion of Bitcoin.”