For several months, Grayscale was buying more Bitcoin than was being mined, but this trend came to a screeching a few weeks ago.

Given the rate at which Grayscale usually buys Bitcoin, it seems like the cryptocurrency fund management company was trying to buy every single Bitcoin in existence. But this pattern ground to a halt more than three weeks ago and hasn’t picked up again since.

Grayscale Bitcoin Trust Fund (GBTC) would typically file a Form 8-K with the Securities and Exchange Commission (SEC) on a weekly basis, declaring its latest Bitcoin acquisitions. But the last time such a report was filed was June 25, when the company disclosed the purchase of almost 20,000 BTC. According to its second quarter report, GBTC was raking in an average of $57.8 million a week in investments.

A Grayscale spokesperson told Cointelegraph that the halt in BTC purchases is temporary, and is due to an administrative quiet period:

“There was an administrative quiet period for the Grayscale Bitcoin Trust private placement. The Trust is now open for subscription as of Friday, July 10 at 4:00pm ET.”

In any case, Grayscale has not issued any SEC disclosures about new Bitcoin acquisitions since then.

Grayscale is indicative of institutional interest in Bitcoin

It is important to note that GBTC is not a hedge fund that buys assets on the expectation of profiting from them later. Instead, it buys Bitcoin whenever investors buy its shares. Currently, each share corresponds to 0.00095891 BTC. 

In the second quarter, 84% of the investments into Grayscale came from the institutional investors, mostly hedge funds. Thus, this reversal is indicative of the institutional interest in the asset. The company itself was boasting of its prowess, buying more Bitcoin than was being mined:

“After Bitcoin’s halving in May, 2Q20 inflows into Grayscale Bitcoin Trust surpassed the number of newly-mined Bitcoin over the same period. With so much inflow to Grayscale Bitcoin Trust relative to newly-mined Bitcoin, there is a significant reduction in supply-side pressure, which may be a positive sign for Bitcoin price appreciation.”

Why did institutional investors stop buying?

There are at least a couple of possible explanations to this sudden pullback. One is seasonal — July tends to be a slow time for investment activity. Many asset managers travel or take vacation. Another reason could be that Bitcoin hasn’t done much in the last few months. 

Bitcoin weekly price chart (Coinbase). Source: TradingView.

While its rapid recovery in the wake of Black Thursday attracted a lot of attention from investors who were getting hammered in traditional markets, and were troubled by the uncertainty from unparalleled stimulus packages. But starting in early May, Bitcoin has been stuck in an “undecided” mode. There are plenty of less-mysterious assets that can do the same thing.