The Bitcoin (BTC) race: Why won't the market giants give up?
Despite an unstoppable bear market, bitcoin (BTC) is still attracting investors. This infatuation with the flagship crypto is no accident. It’s based on the financial relevance the asset has built up over the 14 years of its existence. A period during which the asset has seen its lows. The asset’s lowest valuation was $0.001, its first estimated value in October 2009. The flagship crypto has also experienced highs. In November 2021, the price of bitcoin reached a valuation of $69,992. This figure remains, by far, the highest ever reached by bitcoin since it came into existence. Will the leading cryptocurrency return to this level again? Indeed, bitcoin seems to be facing a glass ceiling. Benefiting from the dynamics of the crypto market, the asset has twice reached a price of $30,000 this year. A level that the flagship crypto was subsequently unable to break through. Yet many players in the crypto industry don’t seem to trust these trends. Indeed, many of them have repeatedly expressed their optimism in this regard. They believe that, given current economic and financial conditions, the price would explode. Could this be the reason why many asset managers are scrambling to buy as many bitcoins as possible? Find out below.
The unbridled race for Bitcoin…
The price of bitcoin (BTC) is falling. But the asset is attractive, that’s a fact. A fact confirmed by the operating results of certain companies in the second quarter of 2023. This is the case of Tether Limited, the crypto company behind stablecoin USDT.
Paolo Ardoino, the company’s CTO, made this clear in a recent speech. In it, he acknowledged the substantial investment made by Tether Limited during this financial year. This expenditure would amount to some $45.4 million. These funds were used to acquire 1,529 bitcoins.
On analysis, Tether Limited’s operational choice to acquire bitcoin does not appear to be tendentious or opportunistic. Since the beginning of the year, the crypto firm had announced that it would allocate part of its quarterly profits to bitcoin. The acquisition of substantial volumes of BTC therefore follows this logic.
In line with this, up to 15% of the company’s quarterly profits were used to buy bitcoin. This brought the total number of BTC held by the company to 54,000, for a portfolio valued at around $1.56 billion. Tether is therefore, to say the least, a whale of the bitcoin market.
Another company, this time a financial one, and not the least on the bitcoin market, has made similar transactions. This is MicroStrategy, the business intelligence software company co-founded by Michael J. Saylor, who is the company’s Executive Chairman.
As of June 27, 2023, MicroStrategy held some 152,333 bitcoins. Total assets valued at around $4 billion. A price calculated by taking into account the current unit price of bitcoin of around $29,000. However, despite being one of the largest holders of BTC in the United States, the company has admitted to acquiring additional BTC. 467 in July, for a total of 12,333 bitcoins acquired at $347 million during the quarter.
“Our bitcoin holdings increased to 152,800 bitcoins as of July 31, 2023, with the addition in the second quarter of 12,333 bitcoins being the largest increase in a single quarter since Q2 2021,” said MicroStrategy CFO Andrew Kang.
In the light of this data, a clear trend seems to be emerging. A bit like an arms race, some companies are in a frenzy to buy bitcoin. How can such a rush be explained? Especially since the crypto market has been showing signs of running out of steam for some time now. A number of recent and upcoming events may provide some clues.
… motivated by current trends …?
If companies like Tether Limited and MicroStrategy are injecting substantial funds into bitcoin, it’s not for fun. There is potentially a well-thought-out strategy behind this choice, based on bitcoin and its explosive potential. At least, that’s what many crypto market analysts envisage. By the end of the year for the optimists, or 2024 for the more reserved.
The basis for this outlook: first and foremost, the performance of the flagship crypto. Since the beginning of the year, it seems to have laughed off the bear market. Although it hasn’t come close to its historic valuation peaks, bitcoin is still alive and kicking. The asset has remained extremely dynamic on the market, buoyed by a deleterious economic context. This situation is linked to a certain crisis of confidence in traditional currency, which is suffering from sustained inflation.
From January 2023 to the present day, bitcoin has in fact staged an impressive rally. Its valuation has risen by almost 76%. This trend is attracting renewed interest from institutional investors. Asset manager BlackRock is the best illustration of this trend. Larry Fink, the company’s boss, who was one of bitcoin’s detractors, has suddenly changed his position.
Convinced of the asset’s relevance, the head of the company sent a Bitcoin ETF application to the SEC. Several other leading asset managers such as Fidelity, WisdomTree and Invesco followed suit. Many analysts estimated that the chances of success of these proceedings would only be a 50% winning bet. Bloomberg’s ETF experts put the odds at around 65%.
The race for bitcoin could therefore be explained by these different reasons. But they may not be the only ones.
… and future trends?
The halving of bitcoin could, to some extent, explain the bitcoin acquisition frenzy of Tether Limited and Microstrategy. This event, programmed into the bitcoin protocol to occur approximately every four years, is generally bullish. David Gamble, an executive at Blockware Solutions, has predicted that the crypto market will reach a market capitalization of $10 trillion. That’s within the next few years. A prospect whose realization would be linked to the arrival of traditional institutional investors on the decentralized financial market (DeFi). A dynamic which, he believes, could be a positive step in DeFi’s evolution.
David Gamble acknowledges the possibility of a meteoric rise in the price of BTC at the advent of halving next year. He therefore recommended that investors consider buying as many bitcoins as possible. A way for them to anticipate a significant appreciation in the asset’s value. On the basis of this argument, we can reasonably assume that Tether Limited and Microstrategy are on the right track.
The bitcoin acquisition policy deployed by players such as Tether Limited and MicroStrategy is not insignificant. It reflects a trend towards investment in the flagship cryptocurrency. This dynamic seems to follow on from bitcoin’s operating results this year, despite a crypto market in decline. It is also potentially the consequence of a rush by institutional investors into the decentralized finance market (DeFi). That said, firms Tether Limited and MicroStrategy appear to be gearing up to profit from a potential BTC surge. A number of financial and crypto market analysts agree.
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Diplômé de Sciences Po Toulouse et titulaire d'une certification consultant blockchain délivrée par Alyra, j'ai rejoint l'aventure Cointribune en 2019. Convaincu du potentiel de la blockchain pour transformer de nombreux secteurs de l'économie, j'ai pris l'engagement de sensibiliser et d'informer le grand public sur cet écosystème en constante évolution. Mon objectif est de permettre à chacun de mieux comprendre la blockchain et de saisir les opportunités qu'elle offre. Je m'efforce chaque jour de fournir une analyse objective de l'actualité, de décrypter les tendances du marché, de relayer les dernières innovations technologiques et de mettre en perspective les enjeux économiques et sociétaux de cette révolution en marche.
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.