There is no doubt that the rally Bitcoiin has seen in 2020 following its low of around $3,000 in March of this year has been prompted by institutional investment. Bitcoin has been courting this kind of interest for a few years now, but a number of reasons have seen things start to flip, such as the impact of Covid-19 on the global markets.
Now, with Bitcoin in uncharted territory when it comes to price, it may be in the same unknown arena with its new market. However, one thing known about the market is that it has money to burn and is starting to dwarf the traditional whales of Bitcoin individuals.
Data from on-chain analytics service CryptoQuant shows that despite long-term investors rushing to offload BTC at a profit, buyer demand is still outpacing them. Outflows hit yearly highs in the hours before $20,000 broke for the first time in history. The combined shortage of BTC on exchanges and institutional buying in over-the-counter venues lays the foundation for a fight over the remaining supply — and price rises are the only logical solution.
The current interest from an entirely new breed of investor in the relatively small cryptocurrency space means that there could well be a supply crisis on our hands soon. Bitcoin only has a limited amount of coins that can exist, with the supply entering the market continually shrinking, and millions of coins already deemed to be missing.
“I’ll repeat… liquidity crisis incoming,” Danny Scott, CEO of United Kingdom-based exchange Coin Corner, summarized.
CryptoQuant CEO Ki Young Ju, admitted that he had been surprised by the whale activity.
“Will focus on the bigger whales next time,” he tweeted.
Ki subsequently highlighted what he described as “massive” outflows from exchange Coinbase as evidence of the institutional over-the-counter, or OTC, activities. Current BTC reserves at exchanges are at their lowest levels since November 2018.
“It looks like massive Coinbase outflows usually go to their new cold wallet for custody/OTC that holds 6000–8000 $BTC. #Greyscale uses #GenesisTrading for buying Bitcoins, and #GenesisTrading uses Coinbase Custody,” he wrote alongside an annotated chart.
2021 ushers in a new market
The news of MicroStrategy, and recently Ruffer, have shown that there is indeed a race to snap up as much Bitcoin as possible. Also, these buyers are certainly in it for the long run and seem to suggest that the next year will be about buying and holding, meaning supply will dry up, demand will rise, and perhaps price too.