A recent report from VanEck reveals that interest in Bitcoin (BTC) has increased significantly over the past 12 months. This growth is primarily driven by institutional adoption and the increasing involvement of countries in Bitcoin mining and global transactions.
Growing adoption by institutions and governments
The report, published on September 19, cites several factors contributing to the increased interest. Growing institutional adoption via exchange-traded products (ETPs) and sovereign participation in Bitcoin mining play a crucial role in this. Bitcoin’s market cap currently stands at around $1.25 trillion, and its share of the total crypto market has grown to 56%.
The report notes that Bitcoin’s correlation to the NASDAQ and stock markets is mixed, while its inverse correlation to the US dollar remains stable. This suggests that Bitcoin could potentially break out of its current pattern. Potential catalysts for this include the looming US debt ceiling deadline and the upcoming presidential election.
Shifting NFT Speculation
VanEck says the Inscriptions protocol was a major contributor to Bitcoin network adoption last year. While daily inscription transactions fell 93% and on-chain retail activity declined, the USD-measured volume of Bitcoin transactions on the blockchain increased 202% year-over-year.
This suggests that despite the decline in popularity of Inscriptions, Bitcoin continues to grow in adoption due to higher transaction volumes. Inscriptions, which record data on the Bitcoin blockchain, are primarily used to inscribe non-fungible tokens (NFTs) called Ordinals.
According to the report, Bitcoin’s price increase this year is better explained by the growing adoption of Bitcoin as a means of storing and transferring value, despite the decline in on-chain activity.
Additionally, Bitcoin trading volumes increased by 173% year-over-year, which is significantly higher than the increase in stock trading volumes, which increased by around 18%.
Entry of institutional players
VanEck points to Bitcoin’s resilience as an alternative reserve asset, driven by institutional investor inflows and sovereign nation involvement in Bitcoin mining. This movement is being fueled by the development of products specifically designed for institutions, such as custody solutions and ETPs. Since the launch of spot Bitcoin exchange-traded funds (ETFs) in the U.S. earlier this year, institutional interest has been growing, with $17.6 billion in flows since Jan. 11, according to data from Farside Investors.
Eric Balchunas, a senior ETF analyst at Bloomberg, praised the presence of institutions among Bitcoin ETF holders on Sept. 9. He noted that more than 1,000 institutional investors disclosed their investments in these funds during two 13F periods. BlackRock’s IBIT ETF saw 20% of its 661 holders made up of institutions and large advisors.
VanEck analysts highlighted that hedge funds’ Bitcoin holdings rose 38% in the second quarter, while those of registered investment advisors increased just 4%. However, adoption of Bitcoin ETPs by domestic brokers lagged, which analysts attribute to outdated “60/40” macro model portfolios that do not yet feature Bitcoin.
Increasing sovereign adoption
In terms of sovereign adoption, VanEck reported that seven countries are now mining Bitcoin with direct government support, with Ethiopia, Kenya, and Argentina the latest additions to the list. This trend is seen as an indication of global dedollarization, potentially bolstering Bitcoin’s role as a global reserve asset.
Additionally, Russia is experimenting with cross-border crypto trading, raising questions about which countries might follow suit, especially after the current geopolitical tensions subside.
Need for censorship resistance
VanEck sees the need for censorship resistance as a third major factor driving Bitcoin adoption. They point to efforts to regulate online speech, including bills in Australia and Brazil aimed at controlling social media activity.
The report cites Brazil’s recent ban on X (formerly Twitter) after the company failed to meet transparency requirements. Analysts warn that the “ideological and political capture” of centralized internet platforms like Google could threaten access to independent information.
The report concludes: “The ideological and political control of centralized internet giants such as Google threatens individuals’ access to credible and independent information.”
Bitcoin’s non-sovereign and censorship-resistant nature could make it attractive to users looking for a network that supports free speech.
This report highlights the growing interest in Bitcoin from both institutional and sovereign circles, with censorship resistance being a crucial factor in the cryptocurrency’s further adoption.
Source: https://newsbit.nl/vaneck-rapport-stijgende-interesse-in-bitcoin-door-institutionele-adoptie/
