Various whales have entered the market, igniting the Bitcoin trend. Are there hidden concerns behind the cryptocurrency frenzy?

According to the Zhitong Finance APP, as of now, Bitcoin ETFs have achieved tremendous success in the United States, holding over 1 million Bitcoins, accounting for about 5% of the current Bitcoin supply.

Another buyer of similar scale may emerge, as Trump's Senate allies push for a bill requiring the Federal Reserve to sell some gold to fund the purchase of 1 million Bitcoins for the U.S. government's reserves.

In the corporate world, Michael Saylor's software company MicroStrategy (MSTR.US) holds approximately $38 billion worth of Bitcoin and has been leveraging capital markets to buy more of this cryptocurrency.

Not long ago, all these developments were unimaginable, when each Bitcoin traded for just a few cents, and the only people interested in it were young liberal technologists trying to create a disruptive financial system free from the influence of governments, Wall Street intermediaries, and other large corporations. But today, the times seem to have changed, and these institutions are taking over more and more Bitcoin.

Mark Connors, founder and chief investment strategist of Risk Dimensions, stated that the U.S. may establish a national cryptocurrency reserve, which could prompt more governments to purchase Bitcoin. All of this constitutes what is known as concentrated risk.

"Is there a risk of concentration held by existing institutions like the G10, G20, or BlackRock?" Connors said. "This is a concerning question, especially for purists."

However, even among purists, there are not many complaints in the market. One reason is simple: overwhelming demand is driving prices higher—at least for now—and people generally hope that prices will continue to rise.

Another reason is that, unlike ownership of company stocks, the underlying program of the Bitcoin blockchain prohibits even the largest holders from exerting any control over how it operates.

"Bitcoin 'old hands' no longer control the global cryptocurrency market, even though they have made the highest profits," said long-term cryptocurrency investor Michael Terpin. "Owning a large amount of Bitcoin is different from controlling Bitcoin. Governments own a large portion of the world's gold, but they cannot control its price or use. Bitcoin will ultimately be the same."

Nevertheless, with the concentration of cryptocurrency ownership, everyone participating in Bitcoin faces risks. Many individual owners of Bitcoin ETFs are not so-called "Hodlers" (referring to steadfast holders of Bitcoin). Instead, if Bitcoin prices plummet, they may flee the market, which could exacerbate the already highly volatile trends of Bitcoin Another potential new whale in the market is the U.S. government itself. As Trump prepares to return to the White House, the U.S. government is shifting from being one of the biggest opponents of the crypto industry to one of its biggest supporters.

Bitcoin and Gold

Trump was once a skeptic of cryptocurrencies but later became a vocal proponent, promising to establish a government reserve based on the more than 200,000 bitcoins already held by the government after asset seizures. He has yet to support the bill proposed by Wyoming Senator Cynthia Lummis to sell Federal Reserve gold certificates to purchase 1 million bitcoins to increase the bitcoin reserve, which has left many market observers anxious about any hints that he might do so.

The enticing prospect of a U.S. strategic bitcoin reserve has brought risks for investors chasing increasingly high prices, as predictions of it reaching $500,000 or even $1 million are becoming more common.

In theory, the Federal Reserve has a large amount of gold—valued at approximately $690 billion at current market prices—that could be sold to purchase the proposed amount of bitcoin, which is currently valued at nearly $100 billion. However, if the Lummis bill begins to gain support from Trump and Congress, these numbers would inevitably change dramatically: a large-scale sale of gold by the government could lead to a drop in the price of this precious metal, while the proposed large-scale bitcoin purchase plan could cause its price to soar.

However, no one can guarantee that Trump will successfully establish a reserve, let alone whether Congress will have enough support to pass a bill to sell a precious metal that has been recognized as a store of wealth for thousands of years to purchase an internet currency that is only 15 years old, known for its boom-and-bust price volatility and reputation as the preferred currency of fraudsters. Trading on the cryptocurrency-based prediction platform Polymarket indicates that the likelihood of Trump establishing a bitcoin reserve within 100 days of taking office is only 28%.

Moreover, if a reserve is indeed established and funding is provided for further purchases, the risks may only increase in the long run.

Noelle Acheson, author of the newsletter "Crypto is Macro Now," states, "Of course, prices will soar. But the market will become more susceptible to factors such as government changes. Even a shift in current thinking could lead to significant selling pressure and a crash, which could undermine the value for global holders, many of whom are counting on bitcoin to protect them from long-term currency devaluation."

However, for now, as the market awaits Trump and the new Congress, bitcoin is in a honeymoon period, during which it is hard to find many short-term bearish investors. After all, the price of this asset has risen from 5 cents in 2010 to nearly $100,000 today, and U.S. ETFs have reduced the risks associated with crypto startups like FTX, which collapsed in 2022 And the risks it brings are spreading throughout the cryptocurrency industry.

Matt Hougan, Chief Investment Officer of Bitcoin ETF issuer Bitwise, stated in an interview that since the beginning of October, 40% of attendees at meetings he held with registered investment advisors and institutions have allocated to this asset, up from the previous 10%.

Hougan is not the only one noticing this interest.

Matthew Sigel, Head of Digital Asset Research at Bitcoin ETF issuer VanEck, mentioned in an interview, "My phone is ringing off the hook. Registered investment advisors seem particularly motivated to abandon 0%" cryptocurrency asset allocation.

As demand grows and the assets of market institutional whales increase, there are not enough sellers to control prices, especially for those "old-school" Bitcoin holders who are unwilling to sell.

Supply and Demand Relationship

According to Glassnode, as of mid-October, 65% of outstanding Bitcoin has not moved for over a year.

Meanwhile, the supply of new Bitcoin continues to shrink, which is a key part of the blockchain design aimed at preventing inflation. Edward Chin, co-founder of Parataxi Capital, calculated that approximately 164,250 Bitcoins are added to the supply each year, which is expected to meet only half of the demand from MicroStrategy and the proposed U.S. government reserves under the Lummis bill.

"If you add up the ETF buyers who have purchased a large amount of Bitcoin so far this year, the demand number will only go up," Chin stated. "Along with other sovereign wealth funds, other non-U.S. retail investors, and other non-U.S. institutional investors, there will not be enough Bitcoin to meet demand unless prices rise significantly, forcing existing holders to sell."

Therefore, the risks brought by the new concentrated ownership group of Bitcoin are twofold: many of the astonishing price predictions for the original cryptocurrency, which once sounded like daydreams of crypto enthusiasts, now seem less distant than before.

Chin expects Bitcoin to rise to at least $500,000, depending on specific actions by the U.S. government. However, he stated, "In today's dollars, the price of Bitcoin could be closer to $1 million, as Bitcoin will effectively become part of the global monetary base like gold does today."