It seems the primary use case for Bitcoin has become investment against the backdrop of renewed buying amid rising inflation concerns. Large investors are buying Bitcoin again, driving the prices up even higher as panic gets out of control. This is strengthening the case for investing in store of value assets, CoinDesk reports.
Holdings reach record 200K BTC
Large investors, who hold 1,000 BTC or more, bought another 142,000 Bitcoins last week. This takes the grand total to almost 200,000 BTC, a record for 2021, said blockchain analytics firm Chainalysis’ in a market report published yesterday. The firm stated in the report:
It is a confirmation of the view that bitcoin is seen as digital gold, or perhaps institutions are just making a longer term trade on the bitcoin price.
In order to beat the competition from Ethereum in the long run, Bitcoin will need to expand its footprint into DeFi, Web3, and other crypto sub-sectors according to Chainalysis:
Bitcoin usage has not reached the sophistication of Ethereum or other Layer 1 assets. A decentralized way of wrapping bitcoin is needed to unlock the use of bitcoin as high-quality capital in DeFi. If bitcoin can be used as capital in Web 3.0 then it will have a future as both a scarce fungible asset and as a useful asset in the more innovative side of crypto.
Breakeven rate at decade high
The US breakeven rate, which reflects market predictions of long-term price pressure, recently reached a ten-year peak of 2.64% according to the Federal Reserve Bank of St. Louis. In October, Bitcoin gained almost 40% to an all-time high of $66,975.
Bitcoin to endure as inflation hedge
According to analysts at JPMorgan, Bitcoin’s impressive growth shows it’s become an inflation hedge due to the crypto’s mining reward halving. Every four years, this programmed code cuts the pace of supply expansion in half. This is in stark contrast to the Federal Reserve’s decades of money printing.
The role of Bitcoin ETFs
ProShares’ Bitcoin futures-focused ETF was the fastest to reach $1 billion – it achieved this in just two trading sessions. According to JPMorgan, there has been a recent shift from gold to bitcoin ETFs. The bank expects this shift to remain bullish throughout 2021.
Strong backing
The growth in whale holdings indicates strong hands back the recent rally. As large holdings began to decline, Bitcoin started losing momentum in the first quarter of 2021. Eventually, this led to May’s market crash. The cryptocurrency was last seen changing hands at $62,935.92.
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