As Bitcoin (BTC) prices continue to rise in the wake of the uncertainty surrounding the US presidential election, it appears that institutional investors are increasingly interested in investing in the markets. During the seven-day period ending October 27, Grayscale Bitcoin Trust, operated by Grayscale Investments, recorded record flows of $ 215 million (15907 BTC), surpassing all weekly flows since its inception.
At current prices, the gray scale is estimated to contain 500,000 BTC by the end of 2020, which is 2.7% of the Bitcoin traded supply. By 2021, it could reach 5%. According to Grayscale’s third-quarter digital asset investment report, the average weekly Bitcoin Trust Grayscale investment increased 40% to $ 55.3 million, compared to a 12-month average of $ 39.5 million. Additionally, companies like MicroStrategy, Square, and Stone Ridge have acquired Bitcoin as treasury reserves, which will help increase revenue by 2020.
An increase in institutional investment in bitcoin was also observed on the Chicago Mercantile Exchange. Cointelegraph discussed this aspect with Tim McCourt, global head of equity indexing and alternative investment products at CME Group, who told Cointelegraph: “We are seeing an increase in the number of large open interest rates (LOIHs), which may indicate an increase in institutions participating in our futures markets. . bitcoins “.
According to CME, LOIH are institutions that have more than 25 CME bitcoin futures contracts, with each contract containing 5 bitcoins. This means that the device will need at least 125 bitcoins, which is approximately $ 1.9 million. Before the election, the number of LOIHs rose to a record high of 102.
By setting the direction
Since Bitcoin futures show an institutional interest in the asset, McCourt explained how the Bitcoin futures were performing before US election night: “The network size is 6,700 Bitcoin CME futures (33,500 Bitcoin equivalent), 75% more than the 2020 average. The open interest is also up 20%.
Explaining the factors behind this increase in institutional interest in bitcoin, Jay Howe, CEO of OKEx cryptocurrency exchange, told Cointelegraph that macroeconomic factors such as the second wave of nationwide coronavirus lockdowns will have an inflationary effect: Into big money print and there is growing concern about the potential harmful effects of inflation on fiat currencies, especially the dollar.
In addition to this significant recent development, PayPal announced that it will launch cryptocurrency payment services in early 2021. Even JPMorgan Chase is optimistic about Bitcoin and says the asset has “potential long-term bullish potential” if it competes closely with gold. As an alternative asset, with the rise of the Millennium Kingdom it becomes a more important aspect of the investor world.
Since Grayscale mutual funds are dominated by hedge funds, this indicates that Bitcoin has also become a hedging tool, just like gold, to protect investors from market uncertainty and is being used increasingly to gain arbitrage spreads. Hao also noted how Bitcoin’s performance increased customer demand for investment firms and hedge funds:
Bitcoin has already grown by more than 115% since the start of the year, compared to gold at less than 30% and S&P at around 8%. Bitcoin gives investors a real opportunity to make money with their own money, rather than risk-free assets like cash, which provide negative returns. This is something that simply cannot be ignored. ”
Various other events have also caused this change in the views of large companies. Companies like Microstrategy, Square and Stone Ridge that buy Bitcoin as a treasury reserve will pave the way for other companies to follow suit, especially given the significant commercial impact these investments have had, as was the case with MicroStrategy. And Square, which will be the main driver of revenue. Hao believes, “This will mark the start of a major trend as we continue this year through 2021, which will be very optimistic for Bitcoin. We have also seen a shift in regulation in favor of Bitcoin, as US banks may have it now.”
Institutional investors can encourage a bullish Bitcoin’s bullish rally
Given the turbulent times brought about by the COVID-19 pandemic, which has led to high unemployment rates around the world, it is possible that retail investors will be reluctant to invest in assets they were not aware of due to a lack of coverage in the mainstream media. . Blockchain technology and its products.