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Main takeaways:
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BTC demand fell below daily mining supply for the first time in seven months.
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Spot Bitcoin ETFs have seen $1.67 billion in net inflows since October 11.
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Bitcoin treasury companies trading below NAVs signal erosion of confidence, potentially pressuring BTC prices further.
Institutional demand for Bitcoin (BTC) fell below the daily mined amount, raising concerns about BTC’s long-term stability, according to an analyst.
Bitcoin supply-demand dynamics are changing
While Bitcoin mining output has remained relatively constant, demand from institutional buyers has “fallen below daily mined supply for the first time in seven months,” according to Capriole Investments head Charles Edwards.
Related: Retail investors ‘withdraw’ at $98.5K: 5 things to know in Bitcoin this week
Edwards shared a chart illustrating key Bitcoin metrics tracking three institutional activities: Bitcoin mined (red), spot ETFs and similar institutional purchases (light green), and BTC. Treasury of digital assets (DAT) corporate activity (orange).
The total amount of Bitcoin purchased by institutional investors is represented by the blue line.
The analysis shows a decline in demand for DAT and ETFs since mid-August, with combined demand falling below daily mining supply on November 3.
Initially, subsequent flows from spot Bitcoin ETFs offset for reduced corporate pressure, thus maintaining overall institutional demand.
However, demand across spot ETFs also began to contract sharply after the market crash on October 11. Since then, these investment products have seen $1.67 billion in net inflows.
On October 31, spot Bitcoin ETFs saw a total daily net inflow of $191 million, with none of the twelve ETFs recording inflows.
This implies that institutional appetite for exposure to BTC via traditional market vehicles has weakened after a period of aggressive buying earlier this year that helped support BTC prices.
Expressing his concerns, Edwards he said“Not going to lie, this was the main metric that kept me bullish the past few months while every other asset outperformed Bitcoin,” adding:
“Not good.”
An Unsustainable Trend for BTC?
Meanwhile, BTC’s rally has cooledfall towards $107,000 after hitting a record high of more than $126,000 on October 6.
Zooming out, the market has consolidated in a wide range above $105,000 since July, reflecting a struggle between bullish optimism and profit-taking.
The DAT trend, pioneered by Strategy, is based on a conventional concept of fiat loans to acquire Bitcoin.
So far, there are “188 treasury companies carrying heavy BTC wallets with no business model,” Edwards added.
The DAT trend, therefore, is a bet that prices will continue to rise, generating capital gains. Market value to net asset value (mNAV) is a metric used to assess the valuation of companies that hold Bitcoin as a treasury asset.
A higher mNAV may indicate that investors are assigning a premium to the company on its future growth prospects, while a lower mNAV may suggest concerns about debt or other risks.
The data reveals that Bitcoin treasury companies have saw their NAVs collapsewipe out billions of paper wealth.
If this trend persists, it could erode the premium these companies command, since the decrease in institutional demand may signal reduced confidence, which in turn could increase selling pressure.
As Cointelegraph reportedBitcoin’s price recovery will remain limited until ETFs and spot institutions, led by Strategy, resume their large-scale purchases.
This article does not contain investment advice or recommendations. Every investment and business move involves risk, and readers should do their own research when making a decision.
