The continuous increase in institutional demand for Bitcoin as the price hovers at $19,000 is optimistic for two reasons.
First, it means that there is consistent demand despite Bitcoin nearing a key resistance area. This shows that institutions are accumulating without the fear of a massive corrective phase at the all-time high.
Second, it shows that the trend of institutions allocating a fraction of their portfolios into Bitcoin is being sustained.
Why Grayscale AUM growing from $7.6 billion to $13 billion in 45 days is bullish
According to Barry Silbert, the CEO of Grayscale, the firm’s AUM grew from $7.6 billion to $13 billion from November 1 to December 15.
Grayscale AUM on Nov 1: $7.6 billion Grayscale AUM today: $13.0 billion
The explosive growth of Grayscale’s AUM is highly important for the growth of Bitcoin in the U.S.
Unlike some regions, like C anada, there is no BTC exchange-traded fund (ETF) in the U.S. Hence, the go-to alternative to an ETF in the U.S. is the Grayscale Bitcoin Trust (GBTC)
The trust operates like an exchange-traded note (ETN). Investors can gain exposure to Bitcoin by purchasing shares of GBTC on OTCMarkets, an over-the-counter securities exchange in the U.S.
This allows institutions to essentially trade Bitcoin with brokerage accounts in the public U.S. market.
Since GBTC tailors to accredited and institutional investors, the growth of Grayscale’s AUM suggests a clear increase in institutional appetite for Bitcoin.
Vetle Lunde, an analyst at Arcane Research, said GBTC now holds just below 3% of the total circulating Bitcoin supply. Lunde said:
“The Grayscale Bitcoin Trust has attracted new investors throughout the year, leading to a doubling of Grayscale’s BTC holdings from approx. 261k BTC in January to 544k BTC by Dec 12th. The holdings of GBTC is just below 3% of the total circulating BTC supply.”
The timing of the rising inflow of capital into GBTC is noteworthy because it shows institutions are not concerned in BTC’s short-term price cycle.
Technically, if Bitcoin continues to reject the $19,600 to $20,000 resistance range, the probability of a larger pullback increases.
Yet, the inflows into Grayscale suggest institutions remain confident in the medium-term price cycle of Bitcoin.
The overall crypto sector is seeing big demand outside of Bitcoin too
According to Lunde, atop GBTC, the Grayscale Ethereum Trust has also seen impressive inflows since January. The analyst noted:
“The growth of the @Grayscale Ethereum Trust has been even more impressive. In January, the ether holdings of the trust sat below 0.5m ETH. Now the holdings of the trust are approaching 3m ETH. The holdings of ETHE sits at 2.5% of the total circulating ETH supply.”
Considering that analysts view other large-cap cryptocurrencies as a higher-risk play on Bitcoin, the rising inflow into Ethereum is another sign of overall institutional confidence.