Over the last few weeks, bitcoin has been pushed into the spotlight with a variety of well-publicized companies acquiring a stake of the worlds largest cryptocurrency by market capitalization. Despite the high-profile acquisitions, the top cryptocurrency did not see significant gains.
Bitcoin price has risen so far in 2020, gaining more than 60 percent since the beginning of the year. Regardless, the massive purchases made by MicroStrategy and Square over the last few weeks did not have any significant impact on the price of bitcoin.
Bitcoin is at the tipping point
Major investment capital firm, Bessemer Ventures which owns stakes in platforms such as corporate platform LinkedIn, pictures board Pinterest, cloud communications tool Twilio, and online streaming platform Twitch, emphasized that it is firmly convinced that bitcoin will evolve into a universally acknowledged asset class. The firm also claimed that the institutional demand in bitcoin had reached a tipping point:
“We strongly believe bitcoin will become a globally accepted asset class that institutions will increasingly seek portfolio exposure to given its asymmetric risk profile, scarcity characteristics, and ability to serve as a digital store of value.”
Earlier this week, the investment capital firm participated in a $50 million fundraiser for the New York Digital Investment Group (NYDIG), an affiliate firm of American asset management firm, Stone Ridge. NYDG which was formed three years ago is now the keeper of the 10,000 BTC tokens worth approximately $115 million that Stone Ridge recently acquired.
Institutional demand for BTC on the rise
The institutional demand for bitcoin has been rising steadily since the beginning of the year. During the second quarter of 2020, the inclination towards bitcoin spiked sharply with crypto asset management firm, Grayscale reporting an influx of $1.4 billion in the capital. During the initial two months of the year, the demand rose steadily constantly before gathering momentum between March and June this year.
One likely catalyst for the swift increase in institutional demand for bitcoin is the collapse in financial markets early in March, with bitcoin price dropping from over $9,000 to $3,600 within a few days. More than $1 billion in futures contracts were liquidated. Regardless of this, trading volumes in marketplaces like Coinbase increased significantly within the next three days.
Bessemer Ventures, while citing how Grayscale breaks bitcoin acquisitions every quarter, noted that due to custody solutions such as NYDIG, institutional demand for bitcoin would continue to rise:
“Institutional demand for this rising asset class is now at a turning point. Some technical problems and regulatory difficulties experienced so far have put some obstacles in front of institutions to invest. However, most of these problems have now been overcome.”
What does this mean for bitcoin?
According to Bloomberg analyst, Mike McGlone, the price of bitcoin is expected to hit $100,000 over the next five years. The analyst highlighted the rising bitcoin hashrate, growing institutional demand, limited supply, and the failing global economy due to the coronavirus pandemic as the critical drivers to bitcoin price in the future.
McGlone cited Grayscale Bitcoin Trust (GBTC) as a critical indicator of institutional demand. The trust holds nearly 45,000 BTC worth approximately $4.7 billion after clinching 17,100 BTC worth about $180 million then.
Several other bitcoin proponents believe the move by firms like MicroStrategy and Grayscale to acquire vast amounts of BTC is bullish for bitcoin investors. According to Danny Scott, the CEO of UK-based CoinCorner, “bitcoin’s foundations are getting stronger by the day.”
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