The Daily Dive #031 - Gauging Institutional Interest Around Bitcoin

HODL Waves

"Do you know that when Bitcoin went from $17,000 to $3,000 that 86% of the people that owned it at $17,000, never sold it?” - Paul Tudor Jones

Well, this was huge in my mind. So here’s something with a finite supply and& 86% of the owners are religious zealots. I mean, who the hell holds something through $17,000 to $3,000? And it turns out none of them — the 86% — sold it. Add that to this new Central Bank craziness phenomenon.” - Stan Druckenmiller on his discussion with Paul Tudor Jones

54% of the circulating supply of bitcoin has not moved in over a year. Over time, an ever increasing proportion of the bitcoin supply is acquired and hoarded, decreasing the available free float, and as exemplified by the quote above, this is an increasingly attractive feature of the asset.

Scarcity, both perceived and realized, sells.

This dynamic on a micro and macro level is what brings about events similar to what occurred this weekend with the bitcoin short squeeze.

If you are short bitcoin, the longer you wait, the greater the likelihood that you will have to pay a greater price than you originally sold for. This is the dynamic of a sound monetary asset undergoing global adoption.

Currently, 76% of the bitcoin supply is classified as illiquid and, over time, this number has only grown.

Grayscale Premium/Discount

The Grayscale Bitcoin Trust (GBTC) discount improved to its highest levels in over two months earlier this week as a rebound in the price of bitcoin has seemingly reinvigorated institutional and retail interest in the security.

With the GBTC discount approaching 0% again following the large unlockings of shares onto secondary markets, the spot bitcoin markets should reclaim some of the previously siphoned off demand that the severely discounted GBTC may have briefly stolen.

It is also worth watching if sufficient demand in secondary markets is able to push shares of GBTC back into positive territory against its net asset value (NAV), as this would most likely mark the return of new share creation of GBTC, which would obviously be a welcome sign in the bitcoin markets.

Following the product’s fall below NAV on February 18, new share creation halted at Grayscale, which was one of the biggest drivers of demand during the second half of 2020 and early months of 2021.

Purpose Bitcoin ETF

Over the last month, inflows and outflows into the Canadian Purpose Bitcoin ETF have remained somewhat stagnant. The ETF currently has 22,318 bitcoin under management.

Although out of reach for many U.S. asset allocators, the Purpose ETF remains a solid indicator for institutional interest around the asset class.

While the pace of inflows into the ETF have certainly slowed down since the months of March and April, it is an encouraging sign to see that total holdings haven’t meaningfully decreased as the price of bitcoin sold off 50%, which was then followed by sideways price action for the last two months.

OTC Desk Outflows Picking Up

Bitcoin outflows from OTC desks have reached the highest level since May this past week, with an average figure of 5,616 bitcoin leaving desks to clients.

Though somewhat trivial, it is noteworthy that OTC outflows have spiked around local bottoms in the market numerous times over the course of 2021.