VanEck has reported a notable increase in interest for Bitcoin (BTC) over the past year, driven by both institutional and governmental initiatives for its adoption.
In its analysis from September 19, the report indicated that the main factors contributing to this upswing include significant institutional adoption through exchange-traded products (ETPs) and increased participation of nations in Bitcoin mining and transactions.
Moreover, the report revealed that Bitcoin’s correlation with the NASDAQ and equity markets showed fluctuations, yet its consistent inverse relationship with the US dollar persists. Analysts suggest that Bitcoin is poised to break out of its existing trend, with potential triggers linked to the approaching debt ceiling deadline and the upcoming U.S. Presidential Election.
Transitioning from NFT Speculation
The findings noted that the trend of Inscriptions played a crucial role in driving network adoption over the past year. Nevertheless, USD-denominated on-chain Bitcoin transfer volumes have soared by 202% year-over-year, despite a 93% decline in daily inscription transactions and a reduction in on-chain retail interactions.
This trend demonstrates that Bitcoin continues to gain traction among larger transaction sizes, even as interest in Inscriptions wanes. Inscriptions, which involve recording data on Bitcoin’s blockchain, are particularly linked to the inscribing of non-fungible tokens (NFTs) known as Ordinals.
The report emphasized:
“With Bitcoin’s on-chain activity diminished, bitcoin’s price appreciation this year is better explained by growing adoption as money: a vehicle for storing and transferring value.”
Additionally, Bitcoin trading volumes have risen by 173% year-over-year, significantly surpassing the 18% growth observed in equity trading volumes.
Institutional Investment on the Rise
According to VanEck, Bitcoin is cementing its status as an alternative reserve asset, bolstered by an influx of institutional investors and government involvement in Bitcoin mining operations.
This institutional engagement is largely driven by two factors: the development of sophisticated products tailored for institutional clients, such as custody solutions and ETPs, and the recent launch of spot Bitcoin exchange-traded funds (ETFs) in the U.S. This has led to an impressive $17.6 billion influx since January 11, as indicated by Farside Investors data.
Bloomberg’s senior ETF analyst, Eric Balchunas, acknowledged the increasing presence of institutional investors among Bitcoin ETF shareholders on September 9, noting that over 1,000 institutional investors reported their stakes in these funds during two recent 13F filing periods. Notably, BlackRock’s IBIT ETF features 20% institutional participation among its 661 holders.
Furthermore, VanEck’s analysts observed a 38% increase in hedge fund holdings of Bitcoin ETPs in the second quarter, while registered investment advisors’ contributions rose only 4%. The uptake of Bitcoin ETPs by national brokerages remains lagging due to outdated “60/40” portfolio strategies that do not yet integrate Bitcoin allocations.
The report also underscored a “growing trend” of countries adopting Bitcoin for both monetary and trade activities.
“Combined, these trends are shifting the dynamics of both Bitcoin’s on-chain fundamentals and off-chain markets.”
On the sovereign front, seven nations are now actively mining Bitcoin with government support, with Ethiopia, Kenya, and Argentina being the latest participants in this domain. This movement signals potential global de-dollarization efforts, which may further solidify Bitcoin’s status as a global reserve asset.
In addition, VanEck’s report discussed Russia’s pilot program for cross-border trade utilizing cryptocurrencies, raising speculation about which other nations might adopt similar strategies, especially post-conflict.
Emphasis on Censorship Resistance
VanEck analysts identified the need for enhanced censorship resistance as a third driving force behind Bitcoin’s growing adoption. They highlighted ongoing attempts to regulate online discourse, including legislative measures in Australia and Brazil aimed at moderating social media activities.
The report pointed to Brazil’s recent ban on X (formerly Twitter) for failing to meet transparency standards. Analysts suggested that the “ideological and political capture” of centralized internet platforms undermines access to unbiased information.
It stated:
“Indeed, we argue that the ideological and political capture of centralized internet behemoths like Google threatens individuals’ access to credible and independent information.”
The report concluded that Bitcoin’s non-sovereign and censorship-resistant characteristics could attract users who value a network that prioritizes free expression.
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