Dan Tapiero says Bitcoin may face shortages if institutional demand for BTC continues to rise.
In recent months, there has been a considerable increase in institutional demand for Bitcoin (BTC) after several high-profile investments. Over time, asset manager and co-founder of 10T Holdings, Dan Tapiero, believes this could lead to a problematic shortage of BTC.
Along with Square’s investments, MicroStrategy and
Stone Ridge, have increased purchases of Bitcoin for the Grayscale Bitcoin Trust.
Based on the rapid growth of institutional investments, Tapiero warns that short sellers may see problems in the future.
Institutional investors rush to Bitcoin
In the third quarter of 2020, the Grayscale Bitcoin Trust registered a US$1.05 billion inflow. This marked the company’s first billion dollar quarter and also highlights record institutional demand. The company’s quarterly report explains:
„Grayscale recorded its largest quarterly inflow, more than $1 billion in the third quarter of 2020, making it the third consecutive quarter for a record-breaking quarter. Cumulative investment in the Grayscale product family for the year exceeded US$2.4 billion, more than double the US$1.2 billion accumulated inflow on products for 2013-2019. ”
The timing of the record quarter at Grayscale is remarkable because it occurs several months after the price of Crypto Trader Scam fell to less than US$3,600.
On 13 March, Bitcoin fell US$3,600 after the settlement of US$1 billion of futures contracts. BTC has recovered steadily since then, eventually rising above $12,500 in early September.
Institutional demand for Bitcoin increased rapidly after what is now known as one of the sharpest falls in Bitcoin in recent history and this indicates that institutions see the power to stay.
Considering the continued increase in the flow of grey-tone entry from institutional investors, Tapiero said:
„Bitcoin’s scarcity is possible. The Grayscale Trust is devouring the BTC as if there were no tomorrow. If 77% of all recent mining companies turn 110%, the lights are out. The supply of non-miners will be kept off the market under pressure. Sold positions will be dead. The price can go to any number. ”
Supply concerns after halving
Speculation on a potential supply-side crisis around the Bitcoin also coincides with the post-halving cycle The Bitcoin went through its third halving on May 11 and, historically, reward reductions lead to a long boom in the next two years.
Halving has been proven to have a direct impact on the price of BTC, especially in the long run, as the rate at which the remaining BTC supply is introduced to the market slows.
Bitcoin has a fixed supply of 21 million and with each halving, the amount of BTC miners can be cut. As a result, fewer BTC are available on the market for purchase every four years.
In 2016, it took Bitcoin about 15 months to peak after the second halving. If a similar pattern follows, one year from the most recent halving would be around the third quarter of 2021.
Coincidentally, the current cycle is being met with unprecedented institutional demand.