The number of Bitcoin addresses holding more than 1,000 BTC units is rising, signaling an increasing demand for the flagship cryptocurrency among institutional investors.
Bitcoin’s ledger is visible publicly which allows onlookers to see addresses and the number of BTC units they hold. Analytics firm Glassnode studied the same public blockchain and realized that more than 200 whales—as the rich Bitcoin holders are called—have appeared on the network so far in 2021.
‘The data [supports] the case that institutions are arriving.”said Glassnode.
Source of Demand
The readings appear as Bitcoin’s strength against the US dollar continues to break records. Since last March, the BTC/USD exchange rate has risen by more than 850 percent, which includes a brief run-up to an all-time high near $42,000 and a 30 percent downside correction later.
Bitcoin’s price rally has appeared out of fears of inflation. The US budget deficit hit 35 percent of its GDP in 2020, surpassing levels seen during World War 2. The Federal Reserve’s ultra-dovish policies and Washington’s trillion dollars worth of stimulus packages pushed the US debt to $80 trillion last year.
Meanwhile, the global debt reached $277 trillion.
“A consequence of this stimulus is that when asset prices go up and interest rates are low, risk premiums get distorted,” noted Mira Christanto, a researcher at data aggregator platform Messari.
“Typically, cash is safer than bonds, which is safer than equities, which is safer than alternative investments (like venture capital, real estate, and hedge funds). But when bond coupons are at 0% and the money faucet is at the max, equities and crypto don’t look so risky. As a result, we’ve seen a big rally for all assets, especially the ones traditionally further up the risk spectrum,”she added.
What’s Ahead for Bitcoin?
The US government led by Democrats have proposed to introduce the third stimulus package but worth $1.9 trillion. While its approval could speed up the US economic recovery, its long-term impact would be felt on the US dollar’s value against the foreign currencies.
The greenback is already down by around 12 percent from its mid-March peak. Meanwhile, Bitcoin has gained excessively during the same period, certifying its ability to handle the cash devaluation.
With whales rising against a booming federal deficit outlook, Bitcoin expects to touch new record highs as an anti-inflation asset.