Institutions Buy Up Bitcoin While Supply Stagnates, Investor HODL Habits On The Rise

Over the first two weeks of August two institutional investors have purchased 23,282 more BTC than has been mined, according to data provided by crypto analyst Kevin Rooke in a recent tweet.

Grayscale Bitcoin Trust purchased 14,422 BTC over that time frame and MicroStrategy purchased 21,454 BTC for $250 million. Crypto commentators were quick to use the two investments as signs that institutions would soon pull Bitcoin into mainstream financial markets.

PC: Kevin Rooke via Twitter

Institutions Hedging Against Inflation

Publicly traded business intelligence firm MicroStrategy made headlines earlier this week for utilizing Bitcoin as its primary reserve currency. The company used all of its allocated inflation hedge funds into Bitcoin in a move which CEO Michael J. Saylor told Coindesk was to help preserve the company’s long term value for shareholders.

“This investment reflects our belief that bitcoin, as the world’s most widely adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash,” Saylor said.

Several crypto analysts have argued that stimulus packages passed by Congress to support the country through the ongoing COVID-19 pandemic would weaken the U.S. dollar, making finite assets like gold or Bitcoin more attractive to investors looking to protect their funds. Other factors including rising tensions with China as the U.S. President Trump threatens to ban apps from Chinese companies including ByteDance and Tencent Holdings have contributed to arguments that the U.S. dollar may soon be devalued.

MicroStrategy’s decision to buy up Bitcoin as a hedge against inflation has fueled hopes that other companies will follow suit.

Miners Producing Less BTC

Since the start of the COVID-19 pandemic in mid-March the Bitcoin balance on exchanges has been on the decline, Glassnode data shows, suggesting investors are keen to hold onto their BTC rather than liquidate. The increased HODLer behavior means there is less BTC supply in the market.

Miners have also been struggling to produce at a high rate since the halving in May. Canada-based Bitcoin miner Hut 8 mined 321 BTC less in quarter two of 2020 than in quarter one. The company attributes the decline in BTC mined and accompanying revenue drop to a decreased block reward combined with difficulty levels recovering to what they were pre-halving.

Struggling miners combined with increased HODLing behavior means there is less BTC supply in the market. The decreased availability of BTC and 21 million cap on its production could make the asset more attractive to institutional investors like Grayscale or MicroStrategy.

By Emily Mason

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