Sophia’s Thoughts on Institutional and Economic Shifts
We're seeing renewed confidence in the market as institutions continue to double down on Bitcoin. How will these moves shape the market as economic shifts unfold?
These are Sophia's Thoughts:
MicroStrategy just made its biggest Bitcoin purchase since 2021 and they now hold over 1% of the total supply.
On a similar note, U.S. Bitcoin ETFs recorded their highest inflows since July, signaling renewed institutional interest in Bitcoin as it taps on USD 60,000.
As the Federal Reserve prepares for a potential rate cut on September 18th, market participants are closely watching how this decision will impact both traditional markets and crypto.
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🚀 Last week’s market performance
The market stayed relatively flat this week, gaining 1.0%. Bitcoin (BTC) slightly outperformed the market, rising 2.6%. The best performing coin of the week was Nervos Network (CKB), surging an incredible 80.2% this week after getting listed on the major South Korean crypto exchange, Upbit. The worst performing coin this week was the meme token ApeCoin (APE) which lost 15.4% over the week.
🧐 What is your crypto mood today?
In each Sophia's Thoughts newsletter, we ask about your crypto mood. Your response to this question helps Sophia get a better sense of the pulse of crypto markets. And this ultimately translates into better insights for you when combined with Sophia's AI models. Your data empowers Sophia to provide you with even better intelligence going forward!
🪙 Microstrategy’s Double Down
MicroStrategy made headlines again this week with its largest Bitcoin purchase since 2021. The company acquired 18,300 BTC for about USD 1.11 billion, bringing its total holdings to 244,800 BTC. With an average purchase price of USD 38,585 per Bitcoin, MicroStrategy’s total investment now stands at over USD 10 billion. The company has seen a Bitcoin yield of 4.4% for the quarter and 17.0% for the year so far. Michael Saylor says that MicroStrategy’s objective “is to buy and hold Bitcoin, and the key for us is to be consistent, transparent and responsible in the pursuit of that strategy.” As a result of this philosophy, MicroStrategy now holds nearly 1.2% of the global Bitcoin supply.
Under the leadership of Michael Saylor, MicroStrategy has become the largest corporate holder of Bitcoin. The company classifies itself as a “Bitcoin development company” as investors buy equity in the software company and simultaneously get exposure to Bitcoin. Despite the volatility of the past couple months, MicroStrategy’s continued to accumulate Bitcoin as part of its capital allocation plan, viewing it as a hedge against inflation.
Marathon Digital Holdings is also making moves in Bitcoin accumulation. The Bitcoin mining firm added more than 5,000 BTC to its reserves in the past month, bringing its total to 26,200 BTC, worth around USD 1.5 billion. With MicroStrategy and Marathon both actively expanding their Bitcoin reserves, institutional players are showing clear long-term confidence in the market.
🌊 ETF Flows
U.S. Bitcoin ETFs have started to regain momentum this past week, recording their largest single-day inflows since late July with over USD 263 million added on Friday, September 13th. This comes as Bitcoin fights at the USD 60,000 level after rising over 10% since the local lows in early September. The interest from institutions was led by Fidelity’s Bitcoin fund (FBTC) with a USD 102 million inflow, followed by ARK Invest/21Shares and Bitwise, which saw USD 99 million and USD 43 million in inflows, respectively.
On Monday, BlackRock’s IBIT ETF recorded its first positive flows in three weeks, adding USD 15.8 million. Bloomberg's ETF Analyst Eric Balchunas addressed concerns surrounding Bitcoin ETFs and their custodians, explaining that “All the ETFs and BlackRock have done is save Bitcoin’s price from the abyss repeatedly,” dispelling concerns about the reliability of Bitcoin ETFs and their backing. Despite the fluctuations, U.S. Bitcoin ETFs remain resilient, with over USD 400 million in net inflows this week and a total of USD 17.3 billion since the beginning of the year.
🧐 Looking ahead
The highly anticipated Federal Reserve meeting on September 18th is set to be a turning point for the markets. This will be the Fed's first rate cut since 2020, and the stakes are high for both traditional financial markets and the crypto space.
The CME FedWatch tool currently indicates a 59% chance of a 50-basis-point cut and a 41% chance of a 25-basis-point cut. Inflation has fallen significantly since its peak in 2022, and the U.S. economy has maintained strong growth and a low unemployment rate while outperforming projections from institutions like the CBO and the Blue Chip Consensus Forecast.
Over the past 11 rate cut cycles since 1982, the S&P 500 and Nasdaq have performed well following the first rate cut in a cycle, typically gaining around 10% within six months. Whether the crypto market will follow a similar pattern remains uncertain, but any signal of extended easing could provide positive momentum for Bitcoin and other risk assets. That said, the crypto market has proven to be more sensitive to macroeconomic factors, and the Fed’s actions may influence institutional and retail investment in the space.
In addition to the U.S. monetary policy decisions, global central banks such as the European Central Bank and the Bank of Canada, have also cut rates recently, signaling a broader trend of monetary easing. As we head into the September 18th Fed meeting, all eyes will be on Jerome Powell’s press conference to decipher the central bank’s strategy for the months ahead.
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