Bitcoin (BTC) Liquidity Crisis Is Coming As Institutions Build Long Term Positions

By Bhushan Akolkar
Published December 3, 2020 Updated December 3, 2020
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Bitcoin (BTC) Liquidity Crisis Is Coming As Institutions Build Long Term Positions

By Bhushan Akolkar
Published December 3, 2020 Updated December 3, 2020

“We are just getting started!” that’s what Grayscale director Michael Sonnenshein said two days back in an interview with CNBC. Grayscale runs one of the biggest Bitcoin Funds – Grayscale Bitcoin Trust (GBTC) – that manages over $10 billion worth of assets. Interestingly, the director’s comments soon after Guggenheim Partners filed with the SEC to seeking exposure to Bitcoin and showing to invest $500 million through the Grayscale Bitcoin Trust.

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But why we are saying all these all of sudden? The recent developments in the crypto space suggest that institutions are coming in big numbers and it won’t be long that the Bitcoin supply goes dry. The COVID-19 economic crisis has fueled Bitcoin’s prospects as a potential inflation hedge getting institutions closer to crypto.

Massive institutional purchases over the last few months suggest that the Bitcoin (BTC) liquidity crisis is looming around. For the entire 2020, there’s been a steep drop in the Bitcoins held on exchanges.

This clearly goes to show that institutions are building up big positions and all of their BTCs are going to the cold storage thereby creating a supply squeeze. The rising demand and supply shortage is surely to take Bitcoin to levels that are unimaginable.

Interestingly, we have also been seeing money moving out of more traditional assets Gold, into Bitcoin (BTC). But former Goldman Sachs hedge fund manager and Galaxy Digital founder Mike Novogratz says that’s not entirely the real story. Rather than seeing it as money going from Gold to Bitcoin, he notes that there’s inherent rising adoption for Bitcoin.

In his recent interview with CNBC’s Squawk Box, Novogratz was asked that why institutions are not buying Bitcoin directly but instead investing in a Bitcoin fund? Novogratz noted that Bitcoin Funds like the Grayscale Bitcoin Trust (GBTC) provides an ETF-like exposure to institutions. Big players usually tend to accumulate ETFs for a longer period with less risk exposure.

He further added that the market is maturing with more and more “institutional pathways” like the Bitcoin funds. Eventually, these big hedge funds will start buying Bitcoins, says Novogratz.

$200K A Conservative Target for Bitcoin By 2021

On Tuesday, popular crypto analysts Willy Woo noted that “spot market inventory depletion roughly 2x longer and deeper” coinciding with the re-accumulation phase. He notes that he’s never been so bullish on Bitcoin and says that $200K could be a conservative target for the BTC price by the end of 2021.

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Disclaimer
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
About Author
Bhushan Akolkar
723 Articles
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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