According to a recent analysis, Bitcoin has entered a deflationary phase as a direct result of the BTC purchases by Strategy, a company specializing in Bitcoin treasury operations. Ki Young Ju, CEO and market analyst at CryptoQuant, asserts that Strategy’s rapid accumulation of Bitcoin outpaces the total output of miners, resulting in an annual deflation rate of -2.33% for the supply-limited asset.
“Strategy’s 555,000 BTC remains untouched with no intention to sell, resulting in an annual deflation rate of -2.23% — a figure which might increase with the involvement of other stable institutional holders,” Ju noted in a post dated May 10.
Michael Saylor, co-founder of Strategy, is a vocal Bitcoin proponent who has successfully convinced several companies to incorporate a Bitcoin treasury plan. Saylor’s advocacy has not only elevated the profile of the digital currency but also constricted the supply of available Bitcoins, consequently pushing up BTC prices and reducing market volatility.
Besides its role in advocacy, Strategy also bridges the gap between Bitcoin and traditional finance markets. By selling corporate debt and equity, Strategy channels funds from traditional finance investors into Bitcoin, enabling further BTC purchases. Saylor revealed that more than 13,000 institutions have direct investments in Strategy stocks.
Adam Livingston, author of “The Bitcoin Age and The Great Harvest,” recently suggested that Strategy is effectively causing a halving in Bitcoin by surpassing miner supply through high demand. As per Livingston, Strategy accumulates about 2,087 BTC daily, which is over four times the daily output of miners, estimated at 450 BTC.
Institutions such as hedge funds, pension funds, asset managers, and tech companies continue to acquire BTC either as a portfolio diversifier or a treasury asset to hedge against potential inflation of fiat currency.
Meanwhile, ETF inflows have contributed to Bitcoin’s price stability by infusing new capital from traditional financial markets, thus tempering the cryptocurrency’s volatility and softening the blow of downturns. However, Anthony Scaramucci, founder of SkyBridge, opines that significant institutional players, such as sovereign wealth funds, will significantly invest in Bitcoin only after comprehensive cryptocurrency regulations are implemented in the United States.
