Dormant Bitcoin supply rises with institutional investors’ increased involvement.
Recent data from hedge fund Ark Invest indicates that a significant amount of Bitcoin supply has remained inactive for at least a year, with approximately 70% of the circulating supply untouched as of June 2023. This trend coincides with a surge in institutional interest in the cryptocurrency, despite ongoing economic uncertainty.
In June, multiple factors contributed to the increased strength of Bitcoin’s price action. Ark Invest, a well-known asset management firm, highlighted this trend in a recent report on Bitcoin. Their data demonstrates the growing support from long-term holders and a noticeable shift in institutional sentiment towards Bitcoin.
Strength of Bitcoin Holder Base
According to Ark Invest’s analysis, around 70% of Bitcoin’s circulating supply has not changed hands for at least one year. This statistic indicates a growing confidence among long-term Bitcoin investors, which strengthens the holder base.
The chart below illustrates a spike in Over-the-Counter Transactions (OTC), suggesting an increasing institutional demand. The balance of BTC held on over-the-counter (OTC) trading desks reached a one-year high, often used as a gauge for institutional activity.
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The 60% increase in OTC Bitcoin balance by the end of the quarter suggests that institutions and capital allocators are focusing more on Bitcoin as an investment avenue.
The report states the following:
In our view, increased balances on OTC desks suggest that institutions and other large capital allocators are increasingly focused on bitcoin.
Meanwhile, there were diverging trends noted between USDC and Tether, two prominent stablecoins. While USDC’s supply decreased by 37% year-to-date, Tether’s supply increased by 25%, reaching a record high in June. Ark Invest attributes this divergence to the uncertain regulatory climate in the United States, which may drive some crypto activity overseas.
Rising Institutional Activity Amid Market Dynamics
An interesting development in June was the reduction of the Grayscale Bitcoin Trust (GBTC) discount from 42% to 30%, following BlackRock’s filing for a Bitcoin spot Exchange Traded Fund (ETF). According to Ark Invest’s report, this lower discount indicates market anticipation for the approval of a Bitcoin spot ETF, which increases the likelihood of GBTC transitioning into an ETF.
However, Ark Invest’s report cautions about potential economic challenges despite these positive signs. The Purchasing Managers’ Index suggests a decline in new orders in the manufacturing sector. At the same time, the U.S. Gross Domestic Income (GDI) indicates signs of contraction, suggesting the possibility of an impending recession.
BTC is currently trading above $30,000, recovering from last month’s dip below that value. The decline in Bitcoin’s value was largely influenced by a legal challenge launched by the U.S. Securities and Exchange Commission (SEC) against Binance and Coinbase, the two leading crypto exchanges.
Nevertheless, Bitcoin’s recent rally is driven by endorsement from heavyweight financial institutions such as BlackRock. This embrace of the digital currency market has injected optimism and fueled Bitcoin’s substantial growth.
Related Reading: Bitcoin Could Soar To $140,000 In Next Bull Cycle, Crypto Analysis Channel
Yesterday, the asset reclaimed the $31,000 mark. However, in the past 24 hours, BTC has retraced and currently trades at $30,400 at the time of writing.
Featured image from iStock, Chart from TradingView
