Institutional support for bitcoin comes at a cost

Bitcoin has been flooded with institutions and their money, creating a crisis in terms of purchases, as all sellers’ liquidity is being absorbed. This lack has resulted in demand for bitcoin, leading to a significant increase in prices in the last quarter of 2020. With the end of the year, bitcoin has a market value of $500 billion (US $0.5 trillion), and the dream seems to be coming true, right? As of press time, bitcoin’s market value exceeded that of JP Morgan, Citibank and Goldman Sachs. So, we won, right? Bitcoin has finally become mainstream. No, a capital no, we haven’t actually won. Technically, bitcoin is gaining mainstream adoption, but if we look closely, it is not adopted, it is an outflow from traditional finance. Yes, bitcoin has surpassed the market value of many well-known institutions, but there is an anti logic here. Let’s explore why this may not be better than bitcoin because it moves it into a new asset class. So far, most bitcoin holders have been retail oriented, but the recent institutional entry has eroded this feature. 16.12% of the realized market value of BTC is now owned by institutional investors, that is, considering the realized market value of bitcoin is 186 billion US dollars. The actual promoter is that of the $19 billion AUM, grayscale’s bitcoin trust constitutes $16.3 billion. Excluding grayscale, the value is as high as 7.52% owned by the organization, which means that grayscale has accumulated $16 billion worth of BTC, while the organization has only accumulated about a quarter of the time. Obviously, the institutions are not accumulating, they are devouring the supply of bitcoin. What’s more, if this situation continues, it will lead to a steady but slow rise in the price of bitcoin. This is superimposed on multiple models of bitcoin (such as S2F or ROI cycle theory), all of which suggest that bitcoin will reach $100000 per coin, which seems obvious. It doesn’t matter, but what’s the price? As mentioned earlier, bitcoin has been and has been a retail driven market for a long time. Due to the disadvantages of traditional markets, institutions need to buy bitcoin. This has two main effects: 1. If institutions continue to accumulate BTC, the price will undoubtedly rise because of high demand and low supply. However, when they do want to make a profit or risk their portfolio and hold cash or transfer it back to its source, this will lead to mass dumping. Basically, the massive entry of institutions will make bitcoin more relevant to the traditional world, because all institutions have the same ideas and play safe. 2. Now, due to the entry of institutions, there is a lack of liquidity of a seller. Similarly, during the profit-making period, there will be too many bitcoin from the institution, leading to the scale of bitcoin collapse unprecedented. The original text is from ambcrypto and compiled by Napoleon of blockchain. The English copyright belongs to the original author of ambcrypto. Please contact the compiler for Chinese reprint.

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