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Is Bitcoin Back? Institutional Investors Bullish on BTC

CryptocurrencyAug 02, 2021 06:00AM ET
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Is Bitcoin Back? Institutional Investors Bullish on BTC

  • There’s a wave of institutional interest in Bitcoin again as bulls rub their hands in anticipation.
  • The movement of massive funds in BTC from exchanges on Wednesday morning is a key indicator of institutional interest.
  • Since the crash in May, this is the first time that a volume of BTC of this magnitude has been moved from platforms.
  • BTC is currently trading at $40,015, which puts it a market capitalization of $751 billion.

Bitcoin rose by over 30% in just a week, and this spike in value sees the world’s largest cryptocurrency surpass $40K for the first time in weeks. Several reasons have been put forward for the recent price run, but all quarters of the cryptocurrency community collectively agree that the run was a result of institutional investment.

A staggering $2.5 billion in BTC was moved off of exchanges on Wednesday in a tell-tale move of institutional interest. There are also rumours swirling of further institutional adoption, as Amazon (NASDAQ:AMZN) appears to be examining a potential future in BTC, which suggests that there is significant interest brewing for BTC.

Institutional Players Are Back in the Game

After months of being on the sidelines, institutional investors are wading back into Bitcoin. On Wednesday, data from Glassnode revealed that a staggering 63,289 BTC was transferred out of cryptocurrency exchanges like Coinbase, Kraken, and Binance.

Michael Rinko, an analyst at Pervalle Global, expressed that the movement of large volumes of Bitcoin from exchanges is an indicator that “big institutional money is back.” He further added that, since May, institutional inflows have been at a bare minimum in the wake of the negative movement of cryptocurrency prices across the board.

The amount of BTC on exchanges fell drastically during the bull run of early 2021 and had plateaued since May. This could be construed as a lack of institutional interest, as they stopped buying and removing bitcoin from exchanges.

Cold Wallets and the Outflows

$2.5 billion in BTC was withdrawn from cryptocurrency exchanges and is most likely being held in cold storage. The use of cold wallets is a common practice for institutions given the security it offers over other methods. Cold storage is a method of storing BTC completely offline, and has the advantage of protecting assets from cyber hacks and other technical vulnerabilities.

According to Rinko, keeping assets in offline storage “effectively adds a layer of friction to the selling process.”

A trigger for the rise of institutional interest is the fear of missing the dip, and this sentiment has led to Bitcoin trading at $40,015.

On The Flipside

  • The reports that Amazon has extensive plans to accept BTC as payment for its services have been refuted by the e-commerce giant.
  • This had a negative impact on the price of BTC and on its daily trading volume, which fell by 17%.

Why Did Institutional Interest Wane?

In early 2021, Bitcoin was the darling token of corporations, and big money circled the asset. MicroStrategy and Tesla (NASDAQ:TSLA) led the charge after the news broke that they had purchased large amounts of BTC.

Tesla purchased $1.5 billion worth of BTC, while MicroStrategy beefed up its BTC holdings to over 90,000 BTC. Other corporations followed their lead and BTC set an all-time high of over $60,000.

Things began to fall apart after Elon Musk expressed grave concerns over Bitcoin’s environmental impact, which was compounded when Chinese authorities heightened their crackdown on cryptocurrencies. This led to the massive slump in prices and the decline of institutional interest in Bitcoin.

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Is Bitcoin Back? Institutional Investors Bullish on BTC
 

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