Bitcoin$ 38,816.40 0.73%
Ethereum$ 2,102.64 0.80%
Cardano$ 0.388889 1.65%
XRP$ 0.613894 0.92%
Solana$ 62.02 3.05%
Polkadot$ 5.49 0.91%
Polygon$ 0.80043 1.52%
FINSCHIA$ 27.08 2.12%
Litecoin$ 71.71 0.37%
Avalanche$ 21.95 0.98%
Uniswap$ 6.05 0.34%
Aave$ 101.78 0.65%

Does Grayscale have an influence on the crypto market enough to influence Bitcoin price?

The reopening of Grayscale services to investors on January 13 had the price of Bitcoin shooting up by almost 20% within 48 hours. The price is currently at around $38,000, while before that it was trading at $35,000 and below.

Grayscale closes and reopens crypto products to new investors

Grayscale is a digital currency investing services company that provides market information, investment exposure, and investment products to the developing digital currency asset class. On 21 December, the company announced it had temporarily stopped accepting new investors in six funds including Ethereum Trust and Bitcoin Trust. Even with this temporary closing to new investors, Grayscale would still obtain added capital from existing investors until it reopened to new investors.

Grayscale re-opened a number of its cryptocurrency products to new investors on Jan. 12, among the Bitcoin. During this time, the investment company added 4,618 BTC to its portfolio at a current value of $182 million. Its crypto portfolio is now at $27.6 billion, when added together with $3.3 billion which was acquired in the last quarter. 

More cryptocurrencies including Bitcoin have experienced a price surge since January 13. The entire crypto market has consequently added $137 billion causing it to cross past the $1 trillion market cap.

Bitcoin’s available supply is drying up

2020 research revealed that institutional investors would increasingly use Bitcoin to hedge against inflation and currency devaluation. Companies such as Microstrategy, JPMorgan, Goldman Sachs and Grayscale have all heavily invested in the crypto asset. It was projected that 90% of institutional holders of crypto assets expected to invest even more in Bitcoin in 2021. 

The increased demand of Bitcoin from these institutions has led to an increase in scarcity of Bitcoin’s available supply. eToro announced to its users yesterday that it expects to experience liquidity problems for its exchange platform. In an email sent to users, eToro said that the unprecedented demand for crypto together with limited liquidity posed challenges to their ability to support BUY orders over the weekend. 

Approximately 900 BTC are being mined per day since Bitcoin halving mid last year. However, Glassnode states that on average, only a third of those mined are being sent to exchanges since July 2020. At the same period, Grayscale has bought about 224,930 BTC which is more than 1,200 BTC every day. Coupled with the amount purchased by other institutional investors, the amount of Bitcoin in supply is quickly drying up. 

Although statistics point to institutional investors having a role to play in crypto’s price, not all are in support especially since Grayscale’s Ethereum Trust has not received the same interest over the last month. Ether’s balance has reduced by 6036 since Dec. 9, when it had attained an all-time high of 2.94 million ETH. During this time, Ethereum has increased by more than 122% while Bitcoin by 116%.

Image courtesy of pixabay

Edward Nored

Edward Nored

Edward is a naturally curious BTC lover with a deep interest in blockchain, fin tech, fields which he dedicates his time to researching.


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