There may not be a single reason for the 39% increase in BTC prices in January, but some suspect institutional investors. But can their influence be quantified?
Bitcoin experienced its second-strongest January on record – and its best since 2013 – up nearly 40% amid widespread reports that institutional investors are back on board.
Jung Yang Chan, head of research at CoinGecko, told Cointelegraph that January 2023 saw “institutional net inflows into digital asset funds, especially over the past two weeks, with Bitcoin being the biggest gainer.”
Meanwhile, the CoinShares blog reported on January 30 that total assets under management in digital asset investment products — a good indicator of institutional participation — rose to $28 billion, led by Bitcoin.
BTC
Stripes down
$22,455
, which is a 43% increase from the lowest point in the current cycle in November 2022.
The reasons for this bullish optimism varied depending on who was asked, ranging from macro factors such as a pause in inflation growth to more technical reasons such as the push for BTC short sellers. Elsewhere, a Matrixport research report noted that institutional investors “are not giving up on cryptocurrencies,” suggesting that up to 85% of bitcoin purchases in January were the result of US institutional players. The cryptocurrency service provider added that many investors used the January 12 printout of the US CPI “as a signal to confirm the purchase of Bitcoin and other crypto assets.”
Almost all of the gains occurred during US trading hours
But how did Metricsport attribute up to 85% of BTC’s monthly growth to US institutional investors? As the Singapore-based firm explained in its latest market review: “The most striking figure is that nearly all of Bitcoin’s +40% year-to-date growth has occurred during US trading hours . […] That’s 85% of Bitcoin’s traffic.” Continuation of Matrixport:
“We have always worked under the assumption that Asia is driven by retail investors and the US is driven by institutional investors.”
So, if the market price of Bitcoin is up during US trading hours but down during Asian trading hours, as it appeared to be in January, can we assume that US institutional investors bought Bitcoin while Asian retail traders bought it and sold it – a kind of yin and yang operation? Probably Yes. During US trading hours, “institutions, or steady hands,” took advantage of dips, Matricsport added.
Did this really make the BTC price go up in January? “In my opinion, the assumption that retail investors in Asia and institutional investors in the US are the two main drivers of net bitcoin inflows is correct,” Keone Hon, co-founder and CEO of Monad Labs – which developed the Monad blockchain – told Cointelegraph. There are, of course, other participants in the market; But when looking at flows, “irregular” has the biggest impact, Hon continued:
“In the current market, institutional players represent a potential new – or renewed – source of demand, similar to early 2021. Meanwhile, on the retail side, Asian exchanges such as Binance, Bybit, Okex and Huobi account for the majority of spot volume and almost all derivatives volume.”
Others, however, are not so sure. “There is no way to confirm that the US markets are driven by institutional investors and the Asian markets are driven by retail players because we have no data on the identity of the traders,” Jacob Joseph, an analyst at CryptoCompare, told Cointelegraph.
It is true that there is a “sentiment” or belief that there is a lot of retail interest in Asia, “especially in Korea, as KRW represents the fourth largest trading pair behind USDT, BUSD and USD,” Joseph continued, but this cannot really be quantified.
Still, he acknowledged that the Matrixport report was interesting, adding: “Our data shows that more than two-thirds of BTC returns in January can be attributed to US market hours, and our historical hourly data also shows that above-average trading occurs during those hours.”
Justin D’Anthen, director of institutional sales at Ember Group – a digital asset company based in Singapore – told Cointelegraph: “I really don’t have the data to say whether the 85% are right or not.” He tended to see the increase in January as broad-based and macro-driven, especially with lower inflation and expectations that the US Federal Reserve will not raise interest rates any further. He added:
“You can see stocks, gold, real estate and yes, cryptocurrencies. This is likely driven by large institutions and smaller investors, especially when FOMO kicks in.
D’Anthon at
