The influence of institutions on the value of 1 btc to usd is through three mechanisms: the magnitude of funds, regulatory games and market signaling. As of November 2023, listed companies (such as MicroStrategy) held 857,000 BTC (4.4% of outstanding supply), out of which MicroStrategy held 158,245 at an average cost of $29,672, with a floating gain of $2.12 billion (Q3 2023 financial report). Its action of buying shares (it bought 6,067 in October 2023) drove the price 9.8% in a week. On the assumption that Bitcoin spot ETF will be approved (on the basis of filings by 8 institutions like BlackRock), one can estimate the first year capital inflow to be 24 billion US dollars (on the basis of ARK Invest model) that is around 3.3% of today’s market capitalization. But the SEC’s tardy approval rulings (e.g., the 120-day extension of Hashdex’s application) have created a short-term price volatility increase to 68% (30-day annualized).
Quantitative institutions and hedge funds wield influence through the derivatives market. The CME Bitcoin futures outstanding contract volume has climbed to 16 billion US dollars (a record high), accounting for 37% of the world’s BTC futures market. Market makers (such as Jump Trading) made a one-day arbitrage profit of 120 million US dollars through cross-exchange arbitrage (with more than 5% spread) during the Silicon Valley Bank crisis in March 2023, increasing price volatility. The discount rate of the Grayscale Bitcoin Trust (GBTC) fell from -48% to -12% (2023 data). If it is translated into an ETF, it will unleash selling pressure of 4.7 billion US dollars (estimated by jpmorgan Chase), placing short-term pressure on 1 btc to usd.
The actions of mining companies create the shape of supply and demand control. Mining companies listed (such as Marathon Digital) possess 12,700 BTC (Q3 2023 reserves), and selling intentions affect market liquidity – when Bitcoin dropped to $17,600 in June 2022, Core Scientific sold 7,202 units in one month (82% of its reserves), which triggered a 14% increase in the medium and short-term downward pressure on prices. The total network computing power (520 EH/s) is paid for by the cost of the mining machine (17,500 US dollars), but if energy costs rise (e.g., a 50% drop in computing power due to China’s ban on mining in 2021), miners’ daily average selling volume can be as much as 3,000 (Cambridge University CCAF model).
Regulatory authorities directly influence market sentiment. In June 2023, the SEC sued Binance (case number 1:23-cv-01599), triggering a 7.3% one-day decline from 1 btc to usd. After German BaFin approved Coinbase’s custody licence, institutional capital inflows in Europe rose 42% weekly (CryptoCompare data). Sovereign fund movements are more strategically significant. Norway’s sovereign fund indirectly invests 0.3% of its BTC position (approximately 460 million US dollars) by holding MicroStrategy shares. When the percentage is increased to 1%, it will introduce to the market a demand of 14.5 billion US dollars.
Compliant product innovation has encouraged funds to come into the market. Hong Kong licensed retail trading on HashKey exchange in October 2023. BTC trade volume for the first week stood at 120 million US dollars (capturing 38% of the local market). Anti-money laundering regulations (such as FATF travel rules) are increasing institutional trading expenses. KYC expense per compliant processing of a single BTC transfer stands at $2.5 (Elliptic data), capping returns of high-frequency tactics.