A month ago, the industry reached new heights with Bitcoin (BTC) reaching nearly $ 64,000, mostly driven by institutional investors. Now that some calm has returned to the market, the bears are wondering: How did institutions behave during the last crash? Did they miss the ship or did they persist in investing? And what impact could this finding have on future institutional participation in the cryptocurrency and blockchain industry?
“Institutional investors have been mostly flat, and now that the dust has settled, [investors] are still confident in their long-term play,” Edward Moya, an analyst at Oanda Market, told Cointelegraph. Chainalysis chief economist Philip Gradwell also wrote in a May 19 market analysis: “Institutions also do not appear to be significant sellers, although they may be more cautious as buyers at this time.”
On the other hand, analysts at JPMorgan tell their clients that institutional investors are dumping bitcoins in exchange for gold during a power outage. Then there was Elon Musk, who said in a May 12 tweet that Tesla would no longer accept Bitcoin for its cars – citing concerns about BTC’s power consumption – and many blamed him for accelerating the Bitcoin market decline. He had already dropped, but after his tweet, he dropped another 40%, and since then he had problems recovering to get back 40 thousand dollars.
The economist Gradwell tried to put things in a certain historical context and noted that the inflow of bitcoin to the stock exchanges was relatively low compared to previous sales. This indicates that “most of the sales come from people who already have assets on the stock exchanges, who are usually retail investors.”
Many cryptocurrencies seem to agree that volatility is driven by retail investors, not institutions. Freddy Zwanzger, co-founder of Anyblock Analytics GmbH and data manager, told Cointelegraph that “institutions usually have long-term goals, so if anything, they will tactically take advantage of the latest price changes – and most likely they will buy in the market at a low price. Prices. ”
Social media seems to support this point. Zwantzger continued: “On Crypto Twitter, I also saw a few newcomers to retail trying to sell, all of the OGs commenting on the deals they made in another twist that happened before and will happen again.” he added:
“Pretty much everyone I know in the industry has either bought – or tried to buy – a flop and is happy to expand their cryptocurrencies.”
Bobby Ong, co-founder and CEO of cryptographic data platform CoinGecko, told Cointelegraph, “The network data shows that BTC has moved from new wallets to old ones, indicating that newbies have given up.” It’s also important to note that BTC traded at a premium on Coinbase in the fall, while massive churns were observed. This indicates that some institutions bought the flop, but it is likely that it will include some institutions that have abandoned it.
“Overall, our clients saw this as an opportunity to balance and add positions at lower prices,” Mattwise, chief investment officer at Bitwise, told Cointelegraph. Bitwise, which primarily serves financial advisors and other professional investors, had net inflows during the downturn.
Jeff Dorman, chief investment officer of Arca, a digital asset management company, tried to dispel some of the ambiguity by noting that the term “institutional investors” is often misused and told Cointelegraph:
“If you include macro and quantitative hedge funds as institutional investors, they’ve largely sold momentum, but traditional institutional investors – retirement, endowment, family offices, etc. – have tried to adapt and have not been affected by volatility.”
So Musk is writing on the wall?
Musk’s May 12 tweet was accused by several media accounts of precipitating the cryptocurrency crash, but not everyone was willing to blame the Tesla boss, who wrote: “We are concerned about the growing use of fossil fuels in bitcoin mining and transactions. The coal that has the lowest emissions of any other fuel. ”
According to Moya, “The cryptocurrency crash this month was fueled by increased trade impact across Asia and a selling panic from mostly new traders and avid money managers.” While Hogan largely agrees that the main driver of attraction is “liquidating overleveraged retail investors,” he also noted rising regulatory risks and “China’s outlook on cryptocurrencies” that appears to be deteriorating.