Bitcoin Institutional Demand Surges After MicroStrategy Invests $450M

A massive bitcoin investment appears to be fueling institutional demand for bitcoin.

MicroStrategy, a $1.5 billion Nasdaq-listed business intelligence and cloud technology group, has acquired 38,250 BTC since early August. There has been a surge in institutional activity across Bitcoin’s major markets following the firm’s aggressive acquisitions.

For example, Bakkt, the bitcoin futures market run by ICE, the parent company of the New York Stock Exchange, saw its highest trading volume ever on Sept. 15. On the same day, Bakkt’s Bitcoin monthly futures facilitated 15,955 Bitcoin contracts, surpassing the previous high by 36%. Each Bakkt Bitcoin futures contract is equivalent to 1 BTC.

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Trading volumes at another cryptocurrency exchange, LMAX Digital, which primarily caters to institutional investors, have also increased in recent weeks. According to Skew, LMAX Digital handles around $82.3 million per day, more than Bitstamp, Kraken and Gemini. Currently, Skew ranks LMAX Digital as the second-largest Bitcoin spot market after Coinbase, illustrating the high institutional demand.

The blockchain sector of the US stock market generally rose: the blockchain sector of the US stock market generally rose, MicroStrategy rose by more than 13.1%, Marathon Digital rose by more than 11.7%, RIOT rose by 9.4%, and BTBT rose by about 6.3%. [2021/11/3 6:27:37]

Over the same period, the assets under management (AUM) of cryptocurrency investment firm Grayscale, which uses the Grayscale Bitcoin Trust to gain exposure to Bitcoin, also increased. On Sept. 2, Grayscale CEO Barry Silbert mentioned that the company’s assets under management had reached an all-time high: $6.3 billion.

The trading volume of Bakkt, LMAX Digital and Grayscale increased at the same time, indicating that after MicroStrategy purchased Bitcoin on a large scale, institutional demand increased overall.

Over the past two months, MicroStrategy has invested $425 million in the purchase of 38,250 BTC, including fees and other expenses. The company initially announced the purchase of 21,454 BTC on Aug. 11, while disclosing its plans to use bitcoin as its primary treasury asset. On September 14, MicroStrategy CEO Michael Saylor revealed yet another Bitcoin investment:

"On September 14, 2020, MicroStrategy completed the acquisition of an additional 16,796 BTC for a total purchase price of $175 million. To date, we have purchased a total of 38,250 BTC for a total purchase price of $425 million, including fees and other expenses."

In this regard, Dan Tepiero, co-founder of 10T Holdings, said that in the long run, other CFOs are likely to follow suit:

"Michael Saylor of MicroStrategy's acquisition of Bitcoin cannot be underestimated today. The wording he used to explain the allocation is perfect. Wording that other CFOs will understand and consider. It's a milestone .”

As of now, trading activity in the institutional market is still significantly lower than retail platforms in the cryptocurrency market. Platforms like Coinbase Pro and Binance process billions of dollars in transaction volume every day.

However, with the increasing demand from institutions on various platforms, including Grayscale, Bakkt and LMAX Digital, the transaction activity of institutions may be able to compete with the transaction volume of retail platforms. In the longer term, the expected emergence of bank-run cryptocurrency custody services and bitcoin funds could further boost institutional sentiment around bitcoin.

LongHash, using data to understand the blockchain.

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