Data Shows Institutional Interest in Bitcoin Is Plummeting; Regulatory Uncertainty To Blame?

  • Headlines around institutional interest and Bitcoin falls to the lowest in over a year
  • Another blow to Bitcoin’s institutional interest is drop in GBTC premium
  • Infrastructure, “too small” market size & regulatory uncertainty behind this lack of interest

Intercontinental Exchange's Bakkt, backed by Starbucks, Microsoft’s venture arm M12, and the Boston Consulting Group, recently launched its physically delivered daily and monthly Bitcoin futures. And yesterday the first block trade of its Bitcoin futures, by Galaxy Digital and XBTO, was also executed.

But as we saw, Bakkt made a really slow start, recording a volume of mere 72 BTC contracts in the first 24 hours.

Moving into October, Bakkt BTC futures contracts saw a plunge of almost 80%.

“Bakkt two weeks on – not much occurring yet with three consecutive sessions < $0.5mln trading,” wrote Skew Markets.

Though commentators believe it’s just a start and Bakkt’s entry in the market is monumental and essential for its maturity, it can’t be ignored that its all-time high has been just 166 contracts, so far.

Headlines around Institutional Interest and Bitcoin Falls to the Lowest in over a year

While, just a few months ago, there has been lots of buzz around strong institutional interest trend coming in the market. Given the fact that retail interest is still low in the flagship cryptocurrency, the last surge in BTC price was also declared to be driven by institutional participants.

However, in the past months, since Q2 of 2019, prices in the cryptocurrency market plunged, with BTC going from $13,900 to $7,730 level. The market cap went down from $385 billion in late June to $208 billion on Sept. 30, losing $177 billion in three months.

According to The Tie, a cryptocurrency trading research company, after seeing tremendous growth through the summer, the headlines around institutional interest in Bitcoin, have taken a drastic drop, falling to a new low in 2019, last seen more than a year back.

Last year as well, around this time, the mentions of institutional interest in Bitcoin took a sudden and huge spike only to free fall soon after.

Another Blow to Bitcoin’s Institutional Interest

Adding salt to the wounds is the premium on GBTC that is down to 7-months low. While at one point, in April, institutional investors were paying 47% premium, it has now come down to 23%.

GBTC is an investment vehicle that tracks the spot price of BTC allowing investors to bet on the digital asset without holding it itself.

At the time of writing, GBTC share was trading at $9.79, as per TradingView, with each share tracking the volume of approximately 0.00097 bitcoin.

Meanwhile, currently, BTC is trading at $8,088 with 24 hours loss of 0.81 percent, as per Coincodex.

But Why?

As for what’s behind lack of institutional interest, Head of Research at Fundstrat Global Advisor, Tom Lee told The Block, it’s mechanical issue in terms of infrastructure and also the market size.

Crypto space, according to him is “too small for the institutional world” as just about 1% of the US owns Bitcoin, so it’s just a “hobby” for them.

Moreover, due to regulatory uncertainty, it’s “reputational risk” for those investors.

“There’s not enough legal and regulatory protection for bitcoin in the U.S. to prevent a White House executive order banning bitcoin, like nothing today would prevent Bitcoin from being outlawed in the U.S.,” he said.

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