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Bitcoin is currently trading at $49, 390, after falling from the all-time-high of $58,332 in the month of February. Even after the sharp fall, it has given YTD return of 84%.

So, what is driving Bitcoin prices? One of the reasons is the fact that apart from retail investors, institutional investors are also buying Bitcoins. Elon Musk, the owner of Tesla, recently announced that he invested $1.5 billion in Bitcoin.

Similarly MicroStrategy, the US based business intelligence company, recently announced that as of February 24, 2021, the company holds an aggregate of approximately 90,531 Bitcoins, which were acquired at an aggregate purchase price of approximately $2.171 billion.

“The company now holds over 90,000 bitcoins, reaffirming our belief that bitcoin, as the world’s most widely-adopted cryptocurrency, can serve as a dependable store of value. We will continue to pursue our strategy of acquiring bitcoin with excess cash and we may from time to time, subject to market conditions, issue debt or equity securities in capital raising transactions with the objective of using the proceeds to purchase additional bitcoin,” said Michael J Saylor, CEO, MicroStrategy.

Will institutions buying Bitcoins affect prices in the long run? 

When institutions buy Bitcoin, they buy it for a very long time. Considering Bitcoins are limited in supply, experts feel this will have positive impact on Bitcoin prices.

“It will have positive impact because the most important thing about Bitcoin that people love is the limited supply (only 21 million Bitcoin will ever exist). So, when large institutional players enter and they start buying, they do not sell for a long period of time. So they are cutting out the supply of Bitcoin in the market. So the supply being stable and someone eating into that supply, naturally, the price is going to appreciate. And that is what we are seeing playing out in the market, which is also the reason,” said Nischal Shetty, CEO and founder of WazirX.

Vikram Rangala, Chief Marketing Officer at ZebPay, concurs.

“The increase in institutional buying is more likely to shrink the bitcoin supply. When MicroStrategy, Tesla, and others buy billions of dollars’ worth and lock it away in their balance sheets in cold storage, they effectively reduce the supply of bitcoins available for purchase. Those companies aren’t talking as if they are planning to sell anytime soon.”