Grayscale Investments has built a solid position to become the largest institutional player in the crypto space. This week, it recorded another milestone with its Bitcoin Trust, Yesterday, Kevin Rooke, a tech and business insider, reported on Twitter that Grayscale had added 12,000 BTC to its Grayscale Bitcoin Investment Trust.
Bad news for Bitcoin bears.
Grayscale's Bitcoin Trust just added 12,319 BTC to $GBTC in a single day.
That's more than the 11,512 BTC they added during all of last week, when Bitcoin broke its ATH.
— Kevin Rooke (@kerooke) December 23, 2020
More Gains for Grayscale
In his tweet, Rooke pointed out that Grayscale’s single-day haul eclipsed the 11, 512 BTC that the firm had purchased throughout all of last week, when Bitcoin hit new highs. Data from Bybt also shows the company’s total Bitcoin holdings have now grown to $13.7 billion in assets under management.
The news comes after Grayscale halted investments into its crypto trusts. A screenshot from a Twitter user showed that the New York-based firm stopped investors from depositing funds into its trusts for Bitcoin, Ether, Bitcoin Cash, Ethereum Classic, and Litecoin. Investments into the company’s Digital Large Cap Fund were also halted.
Grayscale immediately doused fears, explaining to industry news sources that the move was due to the end of a six-month lock-up period for selling recently-purchased shares of the Bitcoin Trust.
Ben Lily, an analyst at Jarvis Labs, explained in a report that the shares in question had been purchased in June. As Lily explained, these shares could be sold to non-accredited investors in the open market, effectively reducing the Bitcoin Trust’s value.
With the Bitcoin Trust being large, this selloff could eventually drag Bitcoin’s price down as well. Thus, Bitcoin could become more attractive for institutions looking to buy the dip.
Institution-Induced Bitcoin Scarcity
While Lily believes that Grayscale’s moves could drag the price of Bitcoin down, it is worth noting that the company isn’t the only institution out there. Data from a Twitter user yesterday showed that major exchanges had seen outflows of about 16,000 BTC yesterday. Analysts believe that these outflows are most likely due to institutional purchases, with many of the Bitcoins going into cold storage.
Many have noted the role of institutions in fueling what is thought to be a Bitcoin scarcity. Last month, crypto investment firm Pantera Capital explained in a report that the recent price rally was due primarily to companies like PayPal and Square’s CashApp, which have snatched up about 70 percent of all newly mined Bitcoins.
With Bitcoin’s monetary policy programmed to be deflationary over time, improved adoption will boost purchasing power and fuel scarcity. Pantera claimed that the latter had kicked in, thanks to institutions flooding the market.
Basic economics teaches us that any asset with enough traction becomes more expensive when scarcity kicks in. With institutions buying up more and more of Bitcoin, its price could very much spike in the coming months.