There is an interesting trend in the world of cryptocurrencies – large companies and institutional investors are actively buying up bitcoins. This leads to deflation of the cryptocurrency – its value rises, and the supply on the market decreases.
Large players and deflation
According to research, large companies absorb newly mined bitcoins, which provides an annual deflation of -2.33%. This happens thanks to the accumulation strategy, which allows institutional holders to accumulate bitcoins faster than miners mine them.
The role of Strategy in deflationary processes
One of the striking examples of such a strategy is the Strategy company, which accumulates 555,000 illiquid bitcoins. The annual deflation rate of Strategy assets reaches -2.23%, which is higher than that of other institutional holders.
Strategy co-founder Michael Saylor actively promotes the idea of a scarce digital currency. His activity inspires other companies to buy Bitcoin, further increasing demand and causing deflation.
Market Impact
More than 13,000 institutions hold strategic Bitcoin reserves, indicating that institutional adoption of the cryptocurrency is becoming more widespread.
The strategy of accumulating Bitcoin by large players limits the supply in the market and increases the price. This may lead to further growth in the value of the cryptocurrency and change its perception among investors and users.
Other Institutional Players
Hedge funds, pension funds, and tech companies also continue to buy Bitcoin. They do this to diversify their portfolios and hedge against inflation. The influx of funds into ETFs stabilizes the price of Bitcoin and smooths out volatility.
The role of sovereign wealth funds
Sovereign wealth funds are not yet increasing their purchases of Bitcoin in large volumes. This is due to the lack of clear rules for working with cryptocurrencies in the United States. However, the emergence of a regulatory framework could lead to massive purchases and an increase in the price of Bitcoin.
Thus, institutional purchases of Bitcoin are becoming an important factor influencing the cryptocurrency market. They contribute to deflation, an increase in value, and a change in the perception of cryptocurrency among investors.
