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Some recent media reports have focused on Bitcoin looking at the involvement of institutional investors.

One of the issues for the investors is the inability (often through mandate restrictions) to hold physical bitcoin.

In many cases, those looking for exposure do so via proxies either by investing in firms that have invested in Bitcoin themselves (such as Tesla) or through holding the futures.

As we have seen in recent times with the oil price crash last year and the commodity cycle of the 2000s, holding onto futures in a contango market can be an unattractive proposition.

It works as long as the price of the underlying keeps going up. The futures premium creates an artificial incentive for new production beyond explicit use solely for storage.

This is, even more, the case in Bitcoin where the cost of storage is so low.

When the tide turns, all of a sudden you have got a chronically oversupplied market with no natural buyers and the market go plonk.

Bitcoin insights from Stephen Innes, Chief Global Market Strategist at Axi