Important points:
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BTC demand is lower than daily mining supply for the first time in seven months.
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The Spot Bitcoin ETF has seen net outflows of $1.67 billion since October 11th.
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Bitcoin treasury companies trading below their NAV indicates a decline in confidence, which could put further pressure on BTC prices.
Analysts say institutional demand for Bitcoin (BTC) is lower than daily mining, raising concerns about BTC’s long-term stability.
Changes in the dynamics of Bitcoin demand and supply
Charles Edwards, head of Capriol Investments, said that while Bitcoin mining production has remained relatively constant, demand from institutional investors has been “lower than daily mining supply for the first time in seven months.”
Related: Retail investors ‘withdraw’ up to $98,500: 5 things to know about Bitcoin this week
Edwards shared a chart showing three key Bitcoin metrics that track institutional activity: Bitcoin mined (red), Spot ETF and similar institutional purchases (light green), and BTC Digital Asset Treasury (DAT) corporate activity (orange).
The total amount of Bitcoin purchased by institutional investors is represented by the blue line.
Our analysis shows that demand for DATs and ETFs has been decreasing gradually since mid-August, with total demand below daily mining supply on November 3rd. The last time this institutional demand was lower than the daily BTC mining amount was in March.
Initially, subsequent inflows from spot Bitcoin ETFs compensated for the decline in corporate pressure and sustained overall institutional demand.
However, following the market crash on October 11, demand for spot ETFs began to decline sharply. Since then, these investment products have seen net outflows of $1.67 billion.
On October 31st, the Spot Bitcoin ETF recorded net outflows totaling $191 million for the day, and none of the 12 ETFs recorded inflows.
This means that institutional investors’ appetite for exposure to BTC through traditional market instruments has waned after an active buying period earlier this year that helped support the BTC price.
Edwards expressed his concerns, saying, “I can’t lie, this has been the main indicator that has kept me bullish in recent months as other assets have outperformed Bitcoin,” adding:
“not good.”
Unsustainable trend in BTC?
Meanwhile, BTC’s rise has subsided, hitting an all-time high of over $126,000 on October 6 before falling towards $107,000.
Zooming out, the market has been consolidating in a wide range above $105,000 since July, reflecting bullish optimism and a tug of war for profit-taking.
The DAT trend, pioneered by Strategy, is based on the traditional concept of acquiring Bitcoin by borrowing fiat currency.
So far, “there are 188 treasury companies carrying heavy bags of Bitcoin with no business model,” Edwards added.
Therefore, the DAT trend is a bet that the price will continue to rise and capital gains will occur. The market value to net asset value (mNAV) ratio is a metric used to assess the valuation of companies that hold Bitcoin as a financial asset.
A high mNAV may indicate that investors are assigning a premium to a company based on its future growth prospects, while a low mNAV may indicate concerns about debt or other risks.
Data shows that Bitcoin treasury companies have seen billions of dollars in paper assets wiped out as the standard price plummeted.
If this trend continues, the premium held by these companies could be eroded as a decline in institutional demand could signal a decline in confidence and could lead to increased selling pressure.
As reported by Cointelegraph, Bitcoin’s price recovery will remain limited until strategy-driven spot ETFs and financial institutions resume large-scale acquisitions.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk and readers should conduct their own research when making decisions.