Does Climbing Hashrate Indicate Low-Key Onboarding?

It's possible that institutions are striking deals directly with miners to buy coins OTC.

Hashrate has doubled over the past year.

Bitcoin's hashrate has soared, more than doubling over the course of the last year. The last 10 days, in particular, have seen hashrate jump 10%.

Is there something happening, or is this just part of the usual bitcoin cycle gold rush?

Are Institutions Buying?

One theory emerging on Crypto Twitter/X is that financial institutions such as BlackRock are buying BTC from miners to seed their forthcoming ETFs.

There are several reasons why institutions might want to buy OTC from miners, rather than off exchanges. They are able to establish contracts for regular purchases of large tranches of coins, at pre-agreed prices. This allows them to avoid the problem of price fluctuation and slippage that may occur when trying to buy off exchanges, in conditions of unpredictable liquidity. OTC deals are also more private, and do not involve crypto/fiat being sent to and from exchanges.

Moreover, it's possible that institutions are investing directly in mining hardware, or beefing up installations they already own. BlackRock, for example, is heavily invested in Marathon Digital, one of the largest publicly traded mining companies

Positioning For Launch

Like the rest of the crypto world, institutions expect the SEC to green light one or (likely) more Bitcoin spot ETFs in the near future, probably by January. These ETFs will need to hold real bitcoins. They do not want to be in a position where they have to buy all the BTC they need at short notice when the funds are approvedd.

Therefore, assuming that they will gain approval within weeks, they may be seeding their ETFs with BTC well in advance. This could explain why hashrate is surging. Recent reports and updates to ETF applicants' filings suggest that the SEC is in active dialog with issuers, and that preparations are at an advanced stage.

However, others have been critical of the idea that network hashrate is being impacted by ETF buyers. Dan Held argues against this, suggesting that ultimately, all trades should be factored into supply and demand.

All trades, whether it is OTC or lit order book, impacts the price. The amount of bought/sold coins that day are identical, just different counterparties. If the miners don’t sell on exchange, they sell OTC, both of which impact aggregate supply/demand for the day.

Nonetheless, the dynamics of buying OTC via miners are very different to purchasing from an exchange, and any effect on spot price may entail a lag.

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