Dan Tapiero believes that Bitcoin could face a shortage if institutional demand for BTC continues to rise.
In recent months, we have seen a considerable increase in institutional demand for Bitcoin (BTC) following several high profile investments. Over time, 10T Holdings‘ asset manager and co-founder, Dan Tapiero, believes this could lead to problematic BTC shortages.
Along with the Square, MicroStrategy and Stone Ridge investments, Bitcoin’s entries into Grayscale’s Bitcoin Trust have increased.
Based on the rapid growth of institutional investments, Tapiero warns that short sellers could see problems in the future.
Institutional investors are rushing to buy Bitcoin
In the third quarter of 2020, the Grayscale Bitcoin Trust recorded an inflow of USD 1.05 billion. This marked the first quarter with a billion dollars from the company and also highlights record institutional demand. The company’s quarterly report states:
„Grayscale recorded its largest quarterly inflow, over USD 1 billion in the third quarter of 2020, making it the third record quarter in a row. The year-to-date investment in Grayscale’s family of products has exceeded USD 2.4 billion, more than double the cumulative product inflows of USD 1.2 billion from 2013 to 2019.“
Grayscale’s record quarter time is noteworthy because it comes several months after the Bitcoin Fast Profit Review price dropped below USD 3,600.
On March 13, the Bitcoin price fell to $3,600 after $1 billion in futures contracts were settled. BTC has been steadily recovering since then, and finally rose above USD 12.500 in early September.
Institutional demand for Bitcoin increased rapidly after what is now known as one of the steepest drops in Bitcoin’s recent history, and this indicates that institutions see staying power.
Given the continued increase in inflows to Grayscale from institutional investors, Tapiero said:
„Bitcoin’s ESCAZES are possible. Barry’s Grayscale Trust is eating up BTC as if there were no tomorrow. If 77% of all new mined currencies are converted to 110%, the lights go out. Non-mining supply will be kept out of the market during the squeeze. The short ones will be dead. The price can go to any number“.
Supply concerns coincide with the post-halving cycle.
Speculation about a possible supply crisis over Bitcoin also coincides with the post-halving cycle. Bitcoin experienced its third halving or halving of the mined block reward on May 11 and historically, halving leads to large upward runs in the two years following it.
Halving has been shown to have a direct impact on the price of BTC, especially in the long term, as the rate at which the remaining supply of BTC is introduced into the market slows down.
Bitcoin has a fixed supply of 21 million coins and, with each halving or reduction, the amount of BTC that miners can produce decreases. Consequently, there is one less BTC available on the market for purchase every four years.
In 2016, Bitcoin took around 15 months to reach an all-time high after its second halving. If history repeats itself, a year from the most recent reduction would be around the third quarter of 2021.
Coincidentally, the current cycle after the halving is meeting unprecedented institutional demand.