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(Kitco News) - Activity related to Bitcoin (BTC), both in the press and on-chain, has been on the rise in recent weeks ever since BlackRock, the world’s largest asset management firm, filed for a spot Bitcoin exchange-traded fund (ETF) on June 15, prompting multiple other financial institutions to follow suit.
Bitcoin hit a low of $24,840, its lowest price since March 16, the day that BlackRock filed its application, but since then it has climbed back above the psychologically important $30,000 support/resistance level, stoking optimism in the crypto community that the next bull market cycle had begun.
BTC/USD Chart by TradingView
One group that welcomed the price increase was Bitcoin miners, who had been accumulating their mining proceeds while BTC price was on a downtrend and welcomed the sudden reversal as a chance to offload their holdings to support their mining operations.
According to a Tuesday tweet from CryptoQuant, a leading on-chain data and analytics provider, miners have sent over $1 billion worth of Bitcoin to exchanges since June 15, which represents a high level of currency outflows.
“Around 33,860 BTC has been sent to derivatives exchanges, although the majority has been recovered back to proprietary wallets,” CryptoQuant said. “Miners saw a reduction of approximately 8,000 BTC in their reserves. In which, only a small portion was sent to spot trading exchanges.”
CryptoQuant said these movements are a sign that “miners may be using their newly minted coins as collateral in derivatives trading activities,” suggesting that they could be looking to hedge their bets in case the price reenters a downtrend.
“Despite the high value, as these coins are not going to spot exchanges, it is very likely that this does not actually represent market selling pressure on the price,” CryptoQuant said.
On-chain data analytics provider Glassnode corroborated the observations by CryptoQuant, tweeting on Tuesday, “Miners are currently recording extremely high Exchange interaction, sending an ATH of $128M to Exchanges, equivalent to 315% of their daily revenue.”
Percent of miner revenue sent to exchanges. Source: Glassnode
Miners continue to face significant headwinds despite the rising price of BTC as mining profitability has declined more than 30% since July and is down over 80% since the peak of the 2021 bull market. The difficulty rate of Bitcoin mining also continues to reach new highs, which means more computational power is needed to mine a Bitcoin block, further straining the resources and earning potential of miners.
Institutional adoption 2.0
Julio Moreno, a senior on-chain analyst for CryptoQuant, also provided some insight into how the recent spike in institutional adoption of BTC, which he dubbed ‘institutional adoption 2.0’, is different from the 1.0 narrative, which “was formed around the idea that as Bitcoin continued to mature as a technology, grow as a financial asset, and be adopted as a currency, it would be increasingly adopted by institutional players.”
Major developments in institutional adoption 1.0 included the purchase of nearly 130,000 BTC by MicroStrategy, the purchase of $1.5 billion worth of BTC by Tesla, and the launch of multiple bitcoin-backed ETFs in Europe and Canada.
“A lack of regulatory clarity was one of the most significant factors that halted the adoption momentum” of institutional adoption 1.0, Moreno said.
The main difference between 1.0 and 2.0 is that in 1.0, “Most institutions adopted Bitcoin as an investment vehicle only for them,” he noted. “Microstrategy, Tesla, and the other companies added Bitcoin to their balance sheet.”
“The core of this new narrative is that Bitcoin gained institutional clients in the last few years, but now it will be available to their clients,” Moreno said. “In other words, traditional finance institutions will make Bitcoin available for many of their clients through their own financial services under their umbrella. Providing access to hundreds of millions of clients can further advance Bitcoin adoption as an investment asset by making it easier for these clients to get exposure to it.”
Moreno also said that the neutral stance on Bitcoin adopted in President Joe Biden’s Executive Order on digital assets, supported by the SEC’s acceptance of a Bitcoin futures ETF in October 2021, “encouraged some financial institutions to enter the space with their investment products.”
This includes various filings and product rollouts by BlackRock, Fidelity, Citadel, Charles Schwab, and Nasdaq, among others.
“Institutional adoption 1.0 that fueled the bitcoin bull run in late 2020 stemmed from the fact that institutions were adding bitcoin to their balance sheet; hence by institutions and for institutions,” Moreno said. “The new narrative will likely change the focus toward the clients of new institutions who would not only add Bitcoin to their balance sheets but also make it accessible for their clients.”
While Moreno is convinced that we have moved onto the next phase of institutional adoption, 1.0 appears to still have some life as MicroStrategy announced that over the past two months, it has bought an additional 12,333 BTC, lifting its total Bitcoin holdings above 152,000 BTC. The tokens were purchased at an average price of $28,136 per Bitcoin, and the average purchase price for all of MicroStrategy’s holdings is now $29,668 including fees and expenses.
