Analysis: On the other hand, bitcoin's institutional support
2020 was without a doubt a phenomenal year for digital assets. Cryptocurrencies were at the forefront, seeing an influx of institutional investors devouring every available bitcoin sell order. The increasing demand from institutional investors for Bitcoin led to positive price movements in the last quarter of 2020. From MicroStrategy to PayPal, Square, MassMutual, SkyBridge to grayscale, Bitcoin seems to finally become mainstream.
By the end of the year, Bitcoin's market capitalization is currently over $ 500 billion, with the digital asset controlling more than 70% of the crypto market share. With a market capitalization of $ 0.5 trillion, Bitcoin's valuation at press time had outperformed financial bigs like JP Morgan, Goldman Sachs (NYSE 🙂 and CitiBank.
But while the entire crypto space is preoccupied with the fact that a lot of money is pouring into Bitcoin and prices are reaching new highs, no one thinks about the other end of the scale. The influx of “big money” is associated with costs.
Is Bitcoin Really Going Mainstream? While Bitcoin appears to be gaining mainstream adoption, it could be argued that the recent events are merely an exodus from traditional finance. Most of the recent institutional participants see Bitcoin as a viable store of value and an option to diversify their portfolio. This is a problem with institutional adoption.
The 2017 Bull Run was fueled primarily by private investors. But this time with players bigger than retail whales, that trait is waning. Data shows that 16.12% of Bitcoin's current market cap is now held by institutional investors. Additionally, according to BTC PEERS, 78% of Bitcoin is now illiquid, and only $ 4.2 million worth of Bitcoin is floating around for sale and purchase.
For example, Grayscale has a Bitcoin trust that accounts for $ 16.3 billion out of its $ 19 billion in assets under management. Since grayscale is not in the picture, up to 7.52% of the Bitcoin in circulation is controlled by other institutions. Surprisingly, it only took most of these giants a quarter to accumulate that much.
At this rate, Bitcoin could reach $ 100,000 per coin. But it cannot be denied that these institutions, like everyone else, make profits. One question nobody asks is what happens if an institution like Grayscale decides to take profits or jeopardize its portfolio? This could mean mass dumping. A classic example of this is Bitcoin's price decline in 2018, when Mt. Gox liquidated Bitcoin through a Japanese exchange – BitPoint – worth around $ 312 million.
When crypto rules go awkward, there is no doubt that these players will quickly take profits. is a clear case study in this regard. A mass exodus of institutional actors from Bitcoin could mean the death of the digital currency.
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