Bitcoin Has Been Captured

Hello and welcome to Coin Bureau's official podcast channel.

My name is Guy and if you're seeking unbiased in-depth information about Bitcoin,

cryptocurrencies, Web3 and all manner of related topics,

then you've come to the right place. I hope you enjoy today's episode.

Over the last few years, institutions have been buying up massive amounts of Bitcoin.

This is bullish because institutions have some of the deepest pockets and all of this money

flooding into the crypto market can only be good for prices, right? Well, yes, but only until

you consider just how much BTC institutions now control. While we've all been busy staring

at the charts, institutional investors have been scooping up BTC by the bucket load.

So much so, in fact, that they now control over 20% of BTC's total supply.

This is starting to raise concerns among investors who are wondering what happens if these

institutions stop buying and start selling. And not only that, but if this buying continues,

could institutions eventually control Bitcoin? Today, we aim to find out. My name is Guy

and you're watching The Coin Bureau. Before we begin though, you need to know that I'm not a

financial advisor and nothing in this video is financial or investment advice. It's educational

content intended to discuss Bitcoin's institutional adoption. If you enjoy content like this,

then prove it by punching that like button and let's get going. Now, if you've been following crypto

at all, you'll know that Bitcoin's institutional adoption has been nothing short of remarkable.

Major banks now offer Bitcoin exposure. Asset managers have rolled out spot Bitcoin ETFs,

public companies are adding BTC to their balance sheets and we've even seen countries like

El Salvador adopt Bitcoin as legal tender. At first glance, this looks like a huge win for crypto.

After all, institutions have brought legitimacy, liquidity and attention to Bitcoin like never before.

What was once dismissed as internet funny money is rapidly becoming one of the world's most

important asset classes. But dig a little deeper and you'll hear a very different argument.

Critics argue that Bitcoin's growing ties to Wall Street and Treadfy aren't a success. Instead,

they see this wave of institutional adoption as a betrayal of Bitcoin's original purpose.

A purpose laid out by its pseudonymous creator Satoshi Nakamoto. As most of you will know,

Bitcoin was born in the aftermath of the 2008 global financial crisis. Trust in banks was shattered,

governments were bailing out institutions previously deemed too big to fail,

and ordinary people were left trapped in a collapsed system that had proved it wasn't fit for

purpose. This systemic failure prompted Satoshi to publish the Bitcoin white paper in 2008,

outlining their vision for a peer-to-peer electronic cash system that would allow people to

transact directly without relying on banks, governments or any other intermediaries.

At its core, Bitcoin was designed to operate independently of Treadfy. That means no central

authority, no behind closed doors monetary policy, and no gatekeepers who can freeze accounts,

censor transactions or devalue the currency through endless printing. Instead, it offered a fixed

supply, transparent rules, and a decentralized network secured by miners spread out across the

globe. Fast forward to today, though, and the picture looks very different. Bitcoin is no longer

independent of Treadfy. It's increasingly being integrated with the very system it was meant

to disrupt. Institutions now hold vast amounts of BTC while regulated futures markets play a

huge role in influencing BTC's price. Even spot Bitcoin ETFs, bullish as they are, let investors

use traditional brokerages to buy shares in a financial vehicle that only provides indirect

exposure to BTC. In other words, Bitcoin is now being wrapped, packaged, and distributed

using Treadfy rails. Now, for some Bitcoin holders, this is deeply unsettling. Many argue that

institutional adoption undermines Bitcoin's core ethos of self-custody and decentralization.

After all, if millions are now accessing BTC through ETFs, trusts or custodians,

are we really reducing the reliance on intermediaries? Meanwhile, beyond the philosophical concerns,

there's also lots of debate around Bitcoin's decentralization. Obviously, major institutions

have far more capital than the rest of us, enabling them to accumulate ungodly amounts of BTC.

And as some of the biggest Bitcoin whales out there, institutions can lobby regulators in ways

ordinary plebs like you and me simply can't. And with great power comes great potential to

reshape financial markets, or whatever it was Uncle Ben said. But here's the problem. Bitcoin's

future growth now depends on continued institutional adoption. While it can function perfectly well as

a decentralized network without any institutional involvement whatsoever, it can only grow so far

relying on enthusiasts alone. Its liquidity and global relevance now hinge on institutions

bringing capital at a scale retail investors simply can't match. On top of that, institutions

bring the infrastructure, compliance frameworks and, frankly, the credibility needed to attract

future investors and enthusiasts. But more importantly, they provide the rails for Bitcoin to integrate

into the wider economy. They provide deep, liquid markets while legitimizing Bitcoin as a store of

value. Without this, Bitcoin might still be dismissed as Internet money, something nerds obsess over

or criminals rely on or both. And that tension between independence and integration could very well

be what defines Bitcoin's future in the coming years. Now, if you've been keeping up with the

headlines, you'll know which institutions have been scooping up BTC and how it could all impact

the crypto market. But if you find yourself missing out on these headlines, then don't worry,

you can easily stay up to date by getting our weekly newsletter sent directly to your inbox.

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Anyway, by this point, you may be wondering just how much BTC is currently held by different

institutions. When you break it down by numbers, the result is truly mind-blowing.

Publicly listed companies have been some of the earliest and largest buyers.

Collectively, they hold over 1.1 million BTC with around 62% of that held by just one company alone.

Yep, you guessed it, strategy, formally, micro-strategy. But it's not just public companies making waves.

Bitcoin ETFs and exchanges actually hold the largest share of BTC at over 1.6 million coins in total.

The largest player by far is BlackRock's iShares Bitcoin Trust, which alone holds roughly 780,000 BTC

nearly half of all institutional ETF holdings. Other major players include Fidelity's Bitcoin Fund

with over 200,000 BTC and Grayscale's Bitcoin Trust with 167,000 BTC.

These products have played a huge role in helping Bitcoin to merge with the legacy financial system.

Governments, meanwhile, are also big holders of Bitcoin.

Collectively, nation-state entities control around 646,000 BTC.

The US alone accounts for roughly 328,000 BTC, followed by China with 190,000 BTC

and the UK with around 61,000 BTC. Now, of course, most of this came from seizing Bitcoin from

criminals. Elsewhere, private companies and DeFi entities have also accumulated boatloads of Bitcoin.

Private firms collectively hold over 288,000 BTC with block.1, topping the list at 164,000 BTC,

followed by USDT-issue a tether with 96,000 BTC. DeFi protocols and similar organizations

hold roughly 372,000 BTC, much of which is locked up to back-wrapped or derivative versions

of Bitcoin. In total, this means that institutions now hold well over 4 million BTC.

As mentioned in the introduction, that's about 20% of the entire Bitcoin supply.

And what's crazy is that this Bitcoin has been accumulated far faster than many analysts

predicted. Case in point, back in May last year, Bitwise projected that institutional ownership

would reach 20%, only by the end of 2026. And yet, here we are, barely into the year,

and that threshold has already been crossed. So, what does this mean going forward?

Well, if the current pace continues, institutions could end up controlling far more than 20%

of BTC's total supply in the next few years. This could be likely if crypto enters a

bear market simply because BTC will be cheaper to accumulate. But obviously, that assumes they don't

dump everything first in order to push prices even lower. This brings us to the pressing question

of how much BTC is being sold by institutions and why. In case you miss the memo,

there have in fact been some big sales lately. For example, Riot platforms, a Bitcoin mining firm,

sold over 1,800 BTC in December, according to the company's press release.

This came after BTC fell roughly 20% over the previous two months, suggesting that Riot was

either de-risking or planning one hell of a Christmas party. But the biggest source of institutional

selling over the past few months has been from Spot Bitcoin ETFs. Since their launch in January

2024, Spot Bitcoin ETFs have become one of the biggest drivers of BTC's price action, both on

the way up and on the way down. When the ETF inflows a strong BTC rallies, when outflows a strong

BTC crashes. Following October's massive liquidation event that saw almost 20 billion dollars wiped

from the crypto market, Spot Bitcoin ETF investors rushed to de-risk. In November, Spot Bitcoin ETFs

saw outflows of over $3.4 billion, marking one of the biggest months for outflows on record.

Outflows then slowed to around $1 billion in December, but the ETF still accounted for more

selling than any other institutional group, with over $800 million sold in the first five days of

December. In January, ETF outflows picked up again with another $1.6 billion of BTC sold and

nearly half sold in the first week. Unsurprisingly, this hasn't held BTC's price over the past few

months. Now, we should reiterate that institutions aren't abandoning Bitcoin, quite the opposite,

in fact. A recent report by Coinbase and GlassNode revealed that 71% of institutional investors

believe BTC is undervalued. In other words, they want to hold more BTC, not less,

and you can learn more about that report by checking out the video we did on it right over here.

Still, this begs the question of whether there could be additional selling in the future

and what could trigger it. Well, perhaps the biggest risk is a regulatory shock. You see the

reasons why institutions are still so bullish is because of how the regulatory environment has

improved so dramatically in recent years. However, if that progress were reversed,

be that through unclear rules, hostile legislation, or sudden enforcement actions,

institutions wouldn't hesitate to reduce their exposure. Unlike retail investors,

they don't huddle through uncertainty. Another possible risk is a macro shock like a recession,

economic stress, or rising geopolitical tensions. Events like these can force institutions to

liquidate assets regardless of their long term beliefs. In these scenarios, Bitcoin would be treated

merely as a liquid asset with institutions acting quickly to preserve that liquidity. And I'd be

remiss if I didn't mention the concerns around quantum computing, which are growing by the day.

If you've been keeping up with the channel, you'll know that quantum technology has the potential

to be able to crack the encryption on Bitcoin wallets, which could result in billions in BTC

being stolen and sold. Now, while many see this threat as being years away,

others aren't so sure, and institutions are inherently forward-looking. To be frank,

this threat is something the crypto industry needs to deal with urgently. Without a proactive

approach, institutions could walk away from Bitcoin entirely, which would have serious implications

for BTC's price. Case in point, Charles Edwards, the founder of Digital asset firm Capriole,

said that BTC could fall below $50,000 if Bitcoin developers don't get serious about the quantum

threat. In his words, quote, we have to fix this next year or bon voyage. Enjoy the biggest

Bitcoin bear market in history. FTX will look like a cakewalk. Yikes.

Now, by this point, you may be wondering if the institutional adoption of Bitcoin could actually

present risks to the network security, especially since institutions now control 20% of BTC's supply

and counting, like we mentioned earlier. Well, you'll be pleased to know that even with this mass

accumulation of BTC, there is no real direct threat to the Bitcoin protocol itself.

That's because Bitcoin security is protected by its decentralized proof of work consensus.

Even with huge amounts of BTC, this doesn't change how the network is secured.

All these institutions would need to start mining Bitcoin for there to be a real risk.

That said, there are some security concerns that we shouldn't overlook, even if they're more

indirect. Put simply, institutional stakes in Bitcoin miners could concentrate the network's

hash power, that is, computational power running the network. This raises the risk of a 51%

attack, where at least half of all miners on the network collude to overpower the other 49%,

effectively taking full control of the blockchain. In practice, though, executing a 51% attack

would be astronomically difficult and expensive. An attacker would need more computing power

than all honest miners combined, along with an ungodly number of specialized machines running

non-stop. Add the enormous energy costs, and even the largest institutions would struggle to

pull it off. In other words, a 51% attack is extremely unlikely, if not outright impossible.

But even if this mass accumulation doesn't present a threat to the Bitcoin network itself,

there's a clear risk to price because of ownership concentration in BTC's supply.

These institutions would only need to sell a fraction of their supply to tank BTC's price.

Recall that institutions collectively hold 4 million BTC. If they decided to sell,

30% of their holdings due to some kind of shock, then this would result in roughly 1.2 million

BTC flooding the market. For perspective, this is more BTC than the holdings of every Bitcoin

Treasury company combined. There's also custodial risks to consider. When institutions buy BTC,

they don't typically use self-custody wallets. They outsource this responsibility by relying on

custodial services. The problem is, this presents another centralization risk since it makes these

custodians a potential single point of failure. This exposes the BTC they hold to numerous risks,

including hacks, fraudulent activity, and even the insolvency of the custodian themselves.

And this isn't just hypothetical. It's happened before. In June 2023, crypto-custodian prime trust

was placed into receivership after it was discovered to only have a fraction of the funds needed

to honor client withdrawals allegedly. Another example is Bitgo, a prominent institutional

crypto-custodian which was found to have a wallet vulnerability in March 2023. Again, allegedly.

Thankfully, no funds were lost and Bitgo worked fast to quickly patch the issue.

Even so, this example highlights how even institutional grade security solutions

can have flaws that if left unchecked could lead to billions of dollars worth of BTC being stolen.

So, while institutions don't threaten the protocol itself, they do introduce financial

and systemic risks that we should be aware of. That said, institutions are unlikely to break Bitcoin

even if their involvement does change the ecosystem. So then, what does all of this mean for BTC's

price? Well, let's start with the obvious. As institutions continue to throw their massive

amounts of capital into Bitcoin, this will continue to push BTC's price up and to the right in the

long term. The catch is that as institutions buy and hodl more BTC, this means there's far less

liquid supply to actively trade. So, even with Bitcoin's market cap in the trillions of dollars,

this could actually increase Bitcoin's price volatility rather than decrease it.

That's simply because the remaining liquid supply would be more sensitive to price fluctuations.

Now, of course, the flip side to this is that as institutions continue to quietly accumulate

billions of dollars worth of BTC in the background, this will result in a passive bid that

provides stronger support for its price. In other words, this constant flow of capital could

actually make BTC less volatile in the long run. In fact, if institutions continue to make BTC a

key part of their investment portfolios, they could end up accumulating even more in the bear market

at a steep discount. Recall that 71% of institutions already think BTC is undervalued.

To these guys, any downside price action is just an opportunity to further accumulate.

And there's also a powerful signaling effect at play. When institutions hold Bitcoin

through the rough patches, it sends a clear message that this asset isn't going away.

That kind of conviction is hard for even the biggest skeptics to ignore, and it lends credibility

not just to Bitcoin, but to the broader crypto ecosystem as well.

Naturally, this will attract many new investors to Bitcoin, both retail and institutional.

Even so, there are very real risks, and we suspect that quantum resistance will become a

major focus area for developers. But if this risk is addressed, then any concerns about

Bitcoin's longevity will be a thing of the past. So, while it's maybe right to have some

concerns about Bitcoin's new direction, it's clear that institutions are increasingly adopting

it. So, the question then becomes, will this adoption come at a greater cost? Let us know your

thoughts in the comments below. All right folks, that's about all from me for today. If you're

looking to reshape your portfolio for the year ahead, then check out the video right over here,

and if you've ever wondered what could happen to the crypto market, if ETH were to go to zero,

then check out the video right over here. Okay, thank you all for watching,

and I'll see you again soon. This is Guy, signing off.

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Okay, that's all for this episode. Thank you for listening, and see you again soon.