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Is the craze for acquiring crypto dying amongst institutional investors?



7 Jul, 2021


Latest Research by crypto analytics firm Glassnode indiactes that institutional investors are losing interest in the biggest cryptocurrency by market cap. Proof of this becomes apparent by looking at the Grayscale Bitcoin Trust (GBTC).

GBTC, a popular investment product which allows investors to trade shares in trusts holding large pools of Bitcoin, is now constantly trading at a persistent discount to net asset value (NAV). The shares in Grayscale’s Bitcoin Trust are now less expensive to buy than Bitcoin itself. But this wasn’t the case until recently; when for years, investors paid a premium to buy stakes into GBTC.

Reversing Demand Trends

A primary driver for Bitcoin price appreciation in 2020 and 2021 was the actual institutional demand.One of the largest factors in this was the one-way flow of coins into Grayscale's GBTC trust fund as traders sought to arbitrage the high premium observed in 2020 and early 2021. Since Feb 2021, the GBTC product has reversed to trade at a persistent discount to NAV, hitting the deepest discount of -21.23% in mid-May.The combined amount of Bitcoin for two popular exchange-traded funds (ETFs)—Purpose and 3iQ—has decreased. Currently, the combined net flows for both ETFs over the last month shows that a total of 8,037 BTC has flowed out of the products.

Is it a cause for concern?

Most likely not as it might simply be an indication of successful investors cashing out their gains.There is no slowing down as crypto investment firm attract hundreds of potential clients.

Glassnode added that coin balance on Coinbase, the biggest crypto exchange in the U.S., had remained stagnant. Previously, the San Francisco-based exchange was pumping out Bitcoin as it was the preferred way for institutions to buy the coin—a sign of demand. But since December, the balance has been flat.

The obvious conclusion

Between observations of the GBTC premium, net outflows from the combined Purpose and QBTC ETFs, and a stagnant Coinbase balance, institutional demand appears to remain somewhat lacklustre.

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