Despite an unstoppable bear market, bitcoin (BTC) is of interest to investors. This craze for the flagship crypto is no accident. It is based on the financial relevance that the asset has built up over 14 years of existence. Period during which the latter experienced lows. The lowest valuation of the asset being $0.001, its first estimate of value in October 2009. The flagship crypto also saw highs. In November 2021, the price of bitcoin reached a valuation of $69,992. This figure remains, by far, the highest peak ever reached by bitcoins since its existence. Will the queen of cryptos return to this level again? Indeed, bitcoin seems to be facing a glass ceiling. Taking advantage of 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 cross. However, many players in the crypto industry seem not to trust these trends. Many of them have, moreover, repeatedly expressed their optimism in this regard. They believe, given the current economic and financial conditions, that the price would explode. Could this be the reason motivating several asset managers, to go out of their way to afford the maximum possible bitcoins? This is what we will see in the following lines.
The observation of a frantic race for bitcoin…
The price of bitcoin (BTC) is falling. But the asset is attractive, that’s a fact. A data confirmed by the operational balance sheet of certain companies in the second quarter of 2023. This is the case of Tether Limited, the crypto company behind the stablecoin USDT.
Paolo Ardoino, the company’s technical director, made this clear in a recent speech. He recognized there the substantial investment made by Tether Limited during this exercise. This expense would be approximately $45.4 million. Funds used to acquire 1,529 bitcoins.
On analysis, Tether Limited’s operational choice to buy bitcoin does not seem tendentious or opportunistic. The crypto firm had announced, since the beginning of the year, that it would allocate part of its quarterly profits to bitcoin. The acquisition of substantial volumes of BTC therefore follows this logic.
According to the latter, up to 15% of the company’s quarterly profits were used to buy bitcoin. This brought the total 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 bitcoin market whale.
Another company, this time financial, and not the least on the bitcoin market, carried out similar transactions. This is MicroStrategy, the business intelligence software publisher co-founded by Michael J. Saylor, who is its executive chairman.
It is known that as of June 27, 2023, MicroStrategy held some 152,333 bitcoins. A total of assets valued around 4 billion dollars. Price calculated taking into account the current bitcoin unit price of around $29,000. Yet despite being one of the largest BTC holders in the US, the company acknowledged having acquired 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 second quarter addition of 12,333 bitcoins being the largest increase in a single quarter since the second quarter of 2021”said Andrew Kang, the chief financial officer of MicroStrategy recently.
In view of these data, a trend clearly seems to be emerging. A bit like an arms race, there would be a frenzy of certain companies to buy bitcoin. How can such haste be explained? Especially since the crypto market seems to be showing signs of running out of steam for a while. Some recent events, but also future ones, can provide clues for interpretation.
… Motivated by current trends …?
If companies like Tether Limited and MicroStrategy are injecting substantial funds into bitcoin, it is not for fun. There is potentially, behind this choice, a well thought out strategy around bitcoin and its potential for explosion. In any case, this is what many analysts of the crypto market are considering. This, by the end of the year for the optimists among them, or in 2024 for the most reserved.
The basis of this perspective: first the performance of the flagship crypto. Since the start of the year, the latter seems to be laughing at the bear market. Without however approaching its historical valuation peaks, bitcoin remains alive, one might say. The asset remained extremely dynamic on the market, driven by a deleterious economic context. A situation linked to a certain crisis of confidence vis-à-vis the traditional currency in the grip of sustained inflation.
From January 2023 until today, bitcoin has actually had an impressive rally. Its valuation has increased by almost 76%. This trend is generating renewed interest from institutional investors. The BlackRock manager is the best illustration of this. Larry Fink, the boss of the company, who was one of the detractors of bitcoin, suddenly changed his position.
Convinced of the suitability of the asset, the head of the company sent a Bitcoin ETF to the SEC. Several other leading asset managers such as Fidelity, WisdomTree and Invesco have done the same. Many analysts have estimated that the chances of success of these procedures would only be a 50% winning bet. For Bloomberg ETF experts, these would be around 65%.
The race for bitcoin could therefore be explained for these different reasons. But they may not be the only ones.
… and future?
The bitcoin halving could, to some extent, explain the bitcoin acquisition frenzy of Tether Limited and Microstrategy. This event, programmed in the bitcoin protocol to occur approximately every four years, is generally bullish. David Gamble, an executive at Blockware Solutions, predicted that the crypto market would reach a market capitalization of $10 trillion. This, in the years to come. A prospect whose realization would be linked to the arrival of traditional institutional investors on the decentralized financial market (DeFi). Dynamics which he believes could be a positive step for the evolution of DeFi.
David Gamble acknowledges the possibility of a meteoric rise in the price of BTC at the advent of the halving next year. He then recommended that investors consider buying as many bitcoins as possible. A way for them to anticipate a significant appreciation in the value of the asset. Based on this argument, it can therefore be reasonably assumed that Tether Limited and Microstrategy are in anticipation.
Conclusion
The bitcoin acquisition policy deployed by players such as Tether Limited and MicroStrategy is not insignificant. It reflects a trend focused on investing in the flagship cryptocurrency. This momentum seems to follow bitcoin’s operational results this year, despite a losing crypto market. It is also potentially the consequence of a rush of institutional investors on the decentralized finance market (DeFi). That said, firms Tether Limited and MicroStrategy seem to be gearing up to take advantage of a possible surge in BTC. Several analysts of the financial and crypto market abound in this direction in any case.
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