Demand for Bitcoin has increased many times over in 2020.
And on-chain data shows that the asset’s limited supply may be causing a rush.
The Bitcoin FOMO Train
Bitcoin, the world’s largest cryptocurrency, experienced a surge in demand last year amid a gloomy economic outlook, concerns about dollar inflation, weakened fiat currencies, incessant money printing and low yields on traditional assets.
The rally even caused institutional players to take notice of the asset as it broke through its previous all-time high of $19,800 and rose as high as $41,750 in December 2020. Some of them multi-billion funds like Guggenheim Partners, which filed its interest in BTC with the U.S. Securities and Exchange Commission last year.
#Bitcoin is emerging in 2021 as the new, compelling institutional grade safe haven asset. Excess cash is a drag on shareholder value in the current monetary environment, so we can expect more firms to adopt Bitcoin as a treasury reserve asset.https://t.co/v3U697RpHv
– Michael Saylor (@michael_saylor) January 15, 2021
Others took the plunge. Paul Tudor Jones, billionaire investor and head of Tudor Investments, put nearly 2% of his capital into the asset class, saying it was a „great speculation“ and the „fastest horse“ among all other assets on the open market.
Technology firms also invested briskly. Fintech service Square, owned by Bitcoin advocate and Twitter founder Jack Dorsey, invested $50 million of its funding in BTC, saying it was a tool of „economic empowerment and offers the world a way to participate in a global monetary system.“
But that was still small compared to business intelligence firm MicroStrategy’s bitcoin purchase. Beginning in August 2020, the firm built a $1 billion position in Bitcoin. The largest purchase came in December, when the firm raised $650 million in a convertible note and used the proceeds to buy more bitcoin.
What on-chain data says
Despite the volumes, institutional interest in bitcoin is just beginning. On-chain analyst Willy Woo currently writes in a tweet that the „whale spawning season“ is here – showing a record number of large bitcoin transactions.
Woo goes on to write:
„The world has 47 million millionaires, 71% of them live in the US or EU, there are only 14.9 million BTC in circulation, and only 4.1 million BTC are liquid and therefore can be bought.“
Whale spawning season is here. (1000 BTC or more).
Very high net worth individuals are coming in, in droves.
This cycle is unlike any we’ve seen before. pic.twitter.com/ea2Slqq9wH
– Willy Woo (@woonomic) January 14, 2021
Such a liquidity squeeze on the sell side likely caused the record buying of bitcoin last month – which in turn drove the asset’s price above $23,000 and beyond, Woo said.
According to Woo, the data would show that the supply of the 4.1 million „liquid“ coins (or those that were available for sale) has steadily declined amid the money printing and stimulus rounds. An observation that suggests the market is running out of sellers.