A major Bitcoin investment seems to be spiking institutional demand for the cryptocurrency.
MicroStrategy, a $1.5 billion business intelligence and cloud technology conglomerate listed on the NASDAQ, has acquired 38,250 BTC since the beginning of August. Subsequent to the firm’s aggressive acquisition of Bitcoin, institutional activity in various BTC markets surged.
Bakkt, a Bitcoin futures market operated by NYSE parent company ICE, for instance, recorded an all-time high trading volume on September 15. Bakkt Bitcoin Monthly Futures facilitated 15,955 BTC contracts that day, surpassing the previous record-high by 36%. Each contract of Bakkt Bitcoin futures is equivalent to 1 BTC.
The volume on LMAX Digital, another cryptocurrency exchange which primarily serves institutional investors, has also increased in recent weeks. According to data from Skew, LMAX Digital is processing around $84 million per day, outpacing Bitstamp, Kraken, and Gemini. Currently, Skew ranks LMAX Digital as the second biggest BTC spot market behind Coinbase, demonstrating high institutional demand.
The assets under management of Grayscale, a cryptocurrency investment firm that enables institutions to gain exposure to Bitcoin through the Grayscale Bitcoin Trust, have also increased in this same period. On September 2, Grayscale CEO Barry Silbert said the AUM of the firm hit an all-time high: $6.3 billion.
The simultaneous growth in the volume of Bakkt, LMAX Digital, and Grayscale indicates an overall increase in institutional demand after MicroStrategy’s bulk Bitcoin purchase.
Over the last two months, MicroStrategy has invested $425 million to purchase 38,250 BTC, including fees and expenses. The company initially announced a purchase of 21,454 BTC on August 11, disclosing its plans to adopt BTC as its primary treasury asset. On September 14, MicroStrategy CEO Michael Saylor revealed an additional Bitcoin investment. He said:
“On September 14, 2020, MicroStrategy completed its acquisition of 16,796 additional bitcoins at an aggregate purchase price of $175 million. To date, we have purchased a total of 38,250 bitcoins at an aggregate purchase price of $425 million, inclusive of fees and expenses.”
Dan Tepiero, the co-founder of 10T Holdings, said other chief financial officers (CFOs) could follow suit in the longer term:
“Hard to understate the importance of the action today from Michael Saylor at MicroStrategy on Bitcoin. The language that he uses to describe the reason that he has made the allocation is flawless. Language that other corp CFOs will understand and now consider. Landmark.”
For now, trading activity in institutional markets remains substantially lower than retail platforms within the cryptocurrency market. Platforms like COINBASE Pro and BINANCE process billions of dollars per day.
But as the demand from institutions across various platforms, including Grayscale, Bakkt, and LMAX Digital, institutional trading activity could potentially compete against retail volumes. The expected emergence of bank-operated cryptocurrency custodian services and Bitcoin funds could further buoy institutional sentiment around BTC in the longer term.