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According to blockchain firm Chainalysis, institutional traders are beginning to have a larger hand in how bitcoin moves and in the kinds of transactions that are occurring within the space.
Chainalysis: We’re Seeing Bigger Institutional Trades
It is often said that institutional players are essential when it comes to bringing legitimacy to bitcoin and cryptocurrency. For bitcoin to be mainstream, professional traders need to use it, store it and sell it. However, it’s widely whispered that institutional players often want nothing to do with cryptocurrencies given that they are extremely volatile. You have just as much chance at losing all your funds as you do in making lots of money overnight.
Institutional players don’t necessarily want to dip their fingers into that pot, which is why so many analysts have suggested in the past that they aren’t quite taking cryptocurrencies seriously yet. Evidence has emerged, though, to suggest this isn’t necessarily true.
Grayscale, for example, saw more than $1 billion in BTC investments during its second quarter this year, meaning that more than $300 million bitcoin investments occurred every month for three full months. Grayscale is an institutional crypto trading platform.
Now, Chainalysis says that professional traders are moving large amounts of bitcoin – transfers in the five-figure range or higher – between wallets, a trend that has seriously increased over the past few weeks ever since bitcoin rose above the $10K mark. The blockchain firm announced in a blog post:
As of June, approximately 90 percent of North America’s cryptocurrency transfer volume came from professional-sized transfers, which we categorize as those above $10,000 worth of cryptocurrency. However, over the last two years in North America, we’re seeing the impact of a growing class of institutional investors whose transfers account for the growing dominance of professionals in the North American market since December 2019.
Chainalysis states that approximately 46 percent of North American bitcoin transfers were for $1 million or more in the year 2019. This number increased to 57 percent in May, suggesting a whopping 11 percent difference over the course of just 12 months. In addition, the “professional market share” of digital transfers rose by five percent, from 87 to 92 percent respectively within the same timeframe.
Chainalysis writes in its blog:
In other words, the increasing dominance of North America’s professional market since December 2019 appears to be almost entirely driven by transfers of $1 million or more worth of cryptocurrency, many of which we believe are coming from institutional investors.
Is the Only the Beginning?
The firm’s senior economist Kim Grauer believes that this is the start of something huge for bitcoin and crypto. Grauer explained:
We anticipate arbitrage opportunities closing up, better solutions for combining liquidity across exchanges, and greater price stability and price discovery. We expect that as regulators and financial institutions better understand the benefits of cryptocurrency’s transparency, they will start to trust the space more.