Bitcoin Institutional Demand Exceeds New Supply for the First Time in Six Weeks

As the cryptocurrency market approaches a pivotal moment, institutional demand for Bitcoin (BTC) has reportedly surpassed new supply.

Key Takeaways

Institutional demand for Bitcoin has increased by 13% compared to daily newly mined BTC.
The latest data indicates a return of supply reduction prompted by institutional buying since early November.
Over the course of just two days this week, exchange-traded funds (ETFs) experienced outflows exceeding $600 million.

Bitcoin is witnessing a resurgence among institutional investors, with demand now outstripping the supply being created by miners.

Bitcoin institutional buys flip new supply for the first time in 6 weeks

Institutions Ramp Up BTC Purchases

Recent findings from Capriole Investments, a quantitative Bitcoin and digital asset fund, indicate that institutions are now purchasing more BTC than what miners are generating. This uptick in institutional interest comes as Bitcoin's price seeks stability more than 30% lower than its peak of $126,000 in October.

Capriole reports that, over the last three days, institutional purchases have outpaced the newly mined supply. This marks the first occurrence of a net decrease in Bitcoin supply solely driven by corporate demand since early November. Currently, institutional acquisitions are 13% higher than the daily fresh supply of mined Bitcoin.

Bitcoin institutional demand vs. mined supply. Source: Capriole Investments

Charles Edwards, the founder of Capriole, noted earlier this month that the period bridging the recent highs of $126,000 and the lows of $80,500 has been challenging for market participants. This includes businesses considering the establishment of corporate Bitcoin treasuries. Notably, there have been no new treasury companies launched in the last month, although some existing companies have started to sell.

One firm of interest is Strategy, recognized as having the largest corporate treasury in the world. Despite a downturn in prices and stock performance, it continues to add to its Bitcoin holdings. Edwards, referencing Capriole's AI-driven analysis, pointed out issues within corporate treasury operations, reflected by significant discounts to net asset value (NAV) and increased leverage.

Though Bitcoin appears attractive based on its fundamental network metrics, pressures from corporate treasuries could create obstacles for a price recovery, according to the analysis.

Bitcoin ETF Outflows Reflect “Strategic Accumulation”

On Wednesday, the on-chain analytics platform CryptoQuant provided an overview of the current market state, describing it as one of transition. It noted a juxtaposition between short-term pessimism and long-term strategic accumulation.

As reported, network fundamentals support market entry, even while capital outflows from various investment avenues, including U.S. spot Bitcoin ETFs, persist. Observers have noted that this disconnect between institutional outflows and the optimism of key market players indicates that Bitcoin is currently navigating a landscape of immediate challenges while anticipating long-term value appreciation, according to CryptoQuant contributor GugaOnChain.

US spot Bitcoin ETF netflows (screenshot). Source: Farside Investors

Data from Farside Investors, a UK-based investment firm, reveals that net outflows from ETFs since the beginning of the week have reached $635 million.