Bitcoin Takes ‘Lion’s Share’ As Institutional Inflows Hit 7-Month High
Crypto Markets Analysis: Bitcoin’s Surge Moves Both Short- and Long-Term Holders Into Profitability. Bitcoin Takes ‘Lion’s Share’ As Institutional Inflows Hit 7-Month High
But the question remains whether short-term holders will sell or stay and become long-term holders.
The price of bitcoin (BTC) has surged in recent weeks, helping both short- and long-term investors to profit, on-chain data shows.
According to analytics firm Glassnode, as of time of writing the percentage of short-term profiting BTC holders increased to 97.5%, its highest level since November. Bitcoin has also been profitable for long-term BTC holders, according to Glassnode.
“Long-term” is considered over 155 days while “short-term” is less than 155 days.
The Long Term Holder MVRV (market value to realized valued) ratio has risen above 1.0 for the first time in six months, indicating that the cost basis for long-term holders is now below the spot price of bitcoin.
Clearly, investors getting long (buying and owning an asset expected to appreciate over time) on BTC at a lower cost basis following a prolonged decline in BTC’s price is driving this trend.
But with over 97.5% of short-term supply now in profit, will newer BTC investors cash in on the move higher or maintain their positions, ultimately becoming long-term holders themselves? And what is the significance of either move?
Evidence from January 2018, April 2021 and November 2021 indicates that an increase in short-term supply in profit above 97.5% preceded sharp downturns in price. Are markets now headed in that direction?
Investors may also wish to scrutinize the stablecoin supply ratio (SSR) and the amount of bitcoin being sent to exchanges, among other indicators.
The SSR declines as investors send more stablecoins to exchanges relative to BTC. This trend indicates more capital being sent to exchanges for the purposes of acquiring more bitcoin.
A similar metric to remember is the exchange reserve balance of stablecoins, because an increase indicates increased buying pressure.
The SSR has increased slightly since Jan. 9, while the exchange balance for stablecoins has declined, which may be concerning to investors.
The opposite holds true for the bitcoin exchange reserve balance. Bullish investors would not want to see bitcoin exchange balances rise because such an increase would suggest more investors are sending BTC to exchanges for the purpose of selling.
Bitcoin Barrels Toward Historic January As Crypto Market Jumps by $280 Billion
* Largest Token Has Added More Than 40% Since Turn Of Year * Hopes Of End To Monetary Tightening Spurred Crypto Bounce
Bitcoin is set for its best January since 2013 on bets that monetary tightening and the crypto-sector crisis are both ebbing.
The largest token is up 39% since the turn of the year, a first-month gain bettered only twice before when crypto was in its infancy.
Smaller coins like Solana, Axie Infinity and Decentraland have doubled in value, part of a $280 billion January climb in digital assets overall, CoinGecko figures show. Bitcoin retreated 2.9% to $23,111 as of 10:44 a.m. in New York on Monday amid broad declines in risk assets.
The rebound from last year’s deep rout is part of a wider revival in risk appetite on expectations that central banks will slow interest-rate hikes and perhaps even cut borrowing costs later this year as high inflation moderates.
The rally in virtual coins has weathered ongoing fallout from the collapse of Sam Bankman-Fried’s FTX exchange — such as the bankruptcy of crypto lender Genesis Global Holdco LLC and a spate of layoffs across the industry.
January “feels like a month of new beginnings, with emerging clarity as to bankruptcy proceedings, corporate restructurings and market fundamentals pointing to the bottom being behind us,” wrote Noelle Acheson, author of the “Crypto Is Macro Now” newsletter.
Still, there are plenty of skeptics who doubt if the rebound in the likes of crypto and tech stocks will last. One risk is that the soft economic landing markets are hoping for is fanciful because rates must stay higher for longer.
The comeback of speculative assets like Bitcoin and the Ark Innovation ETF “will likely reverse” if oil, wages and consumer-price increases shift the “soft landing” narrative temporarily in coming weeks into a “no landing” view, Bank of America Corp. strategists led by Michael Hartnett said last week.
Federal Reserve Chair Jerome Powell may also remind investors that officials plan to keep rates elevated for some time. He’s due to speak after an expected downshift by the Fed to a quarter-percentage-point hike this week.
Some corners of global markets are also flashing warnings. For instance, hedge funds have built up the biggest bearish bet on bond futures on record, clashing with the narrative that a peak in rate hikes is near.
For now, momentum is king. Rick Bensignor of Bensignor Investment Strategies targeted $25,000 for Bitcoin in a note Monday, a level it last hit in August.
Bitcoin Prices Rally As Larger Traders Take Charge
Smaller investors pull back from the market after the collapse of crypto exchange FTX.
Larger investors appear to be powering a recovery in bitcoin prices, as the sway of smaller individual traders over cryptocurrency markets wanes.
Based on end-of-day trading prices, bitcoin has rallied about 51% from a nadir hit in November, after the collapse of the crypto exchange FTX, according to Dow Jones Market Data.
It was quoted late Thursday at about $23,600, and drifted slightly lower in early trading Friday. Other tokens such as ether and dogecoin have also rebounded. The recovery mirrors a rebound in other risky assets, such as some high-growth technology stocks.
A shift in trading patterns points to a pullback from retail investors in a market that was once dominated by these nonprofessional, individual traders. Instead institutions, including hedge funds, are becoming more influential.
Bitcoin, as the oldest digital token and the largest by market capitalization, is a popular choice for betting on the outlook for cryptocurrencies.
U.S. investors in particular appear to be behind the recent buying, said Markus Thielen, head of research at Matrixport, a crypto lender and trading platform.
Mr. Thielen pointed to data showing most of the recent crypto rally has happened during U.S. trading hours, and recent gains had come largely after U.S. inflation data was released on Jan. 12, an event that would typically garner more focus among institutional investors.
Similarly, Edmond Goh, head of trading for the crypto market maker B2C2 Ltd., said: “We are seeing funds being more active than retail participants.”
Smaller individual traders are typically classed as retail investors. Mr. Goh said that last year his firm classified more than 45% of the trading flows it saw from clients as coming from retail, versus 34% so far in 2023.
Enthusiasts say digital currencies remain attractive investment opportunities, despite last year’s market turmoil, and some draw parallels with safe-haven assets such as gold. Many are eager to help build a financial system that is less reliant on traditional banks, regulators and governments.
Skeptics, such as JPMorgan Chief Executive Jamie Dimon, and senior European Central Bank officials, argue bitcoin is a purely speculative instrument lacking either the practical applications of a commodity or the income-generating power of traditional financial assets such as stocks and property.
But despite the many crises, bitcoin doesn’t seem to go away.
The crypto industry has endured a rolling crisis since early last year, spanning the implosion of the Terra stablecoin, and the collapse of institutions including hedge-fund manager Three Arrows Capital, lenders Celsius Network LLC and Genesis Global Holdco LLC, and the November bankruptcy filing by Sam Bankman-Fried‘s FTX empire.
Bitcoin is also still a long way off its record high, hit in late 2021, of above $67,000, meaning any investor who bought close to that peak remains a long way underwater on their investment.
“I don’t think FTX would freak out in the slightest anyone who understands the fundamental investment case of bitcoin,” said Christopher Bendiksen, head of bitcoin research at asset manager CoinShares.
Mr. Bendiksen said flows into CoinShares’ BITC bitcoin exchange-traded product totaled $26.6 million in January, the third highest on record. The product is listed in some countries in Europe including Germany and France, but isn’t available on U.S. exchanges.
The rebound appears to have generated some of its own momentum. Ilan Solot, co-head of digital assets at London-based financial firm Marex Solutions, said some bigger investors such as hedge funds who had bet against bitcoin were now buying to cover their bets against bitcoin falling. Mr. Solot’s clients include hedge funds and family offices, as well as wealthy individuals.
More broadly, Mr. Solot said demand was particularly high for structured products based on digital assets. These are complex investments, such as so-called autocallables, that are designed to shield investors from short-term volatility.
“We have seen a clear pickup of interest in digital assets on our desk since the start of the year,” Mr. Solot said.
Bitcoin Dominates As Primary Focus For Digital Asset Investors: Report
According to CoinShares, digital asset investment products saw inflows totaling $76 million last week.
On Feb. 6, European cryptocurrency investment firm CoinShares published its “Digital Asset Fund Flows Report,” which revealed that investors are showing a strong interest in digital asset investment products, with inflows totaling $76 million last week, marking the fourth consecutive week of inflows.
The report indicates a change in investor sentiment for the start of 2023, with year-to-date inflows now at $230 million. This growth has led to an increase in total assets under management (AUM), which now stands at $30.3 billion — the highest since mid-August 2022.
Investors are primarily focusing on Bitcoin, with weekly inflows of $69 million, accounting for 90% of total flows for the week. This investment growth primarily comes from the United States, Canada and Germany, with weekly inflows of $38 million, $25 million and $24 million, respectively.
However, opinions are divided over the sustainability of this growth, with short-Bitcoin inflows totaling $8.2 million over the same period.
Although these inflows are relatively small compared to long-Bitcoin inflows, they have increased by 26% of total AUM over the last three weeks. Despite this, the short-Bitcoin trade has not attracted sizable interest year-to-date, with total short-Bitcoin AUM falling by 9.2%.
Overall, positive inflows into digital asset investment products highlight investors’ growing confidence in the market.
Bitcoin Takes ‘Lion’s Share’ As Institutional Inflows Hit 7-Month High
$117 million heads into crypto investment products in a single week, with the vast majority going straight into Bitcoin.
Bitcoin rebounding 40% in January sparked the largest inflows of institutional cash since June 2022, data shows.
In its “Digital Asset Fund Flows Weekly” report on Jan. 30, digital asset investment and trading group CoinShares confirmed $117 million heading into crypto in the last week of the month.
Institutions “Not Sold” On Post-Merge Ethereum
Bitcoin is still on the radar as an institutional investment opportunity.
As demonstrated by CoinShares’ latest data, it took just weeks of BTC price action recouping prior losses to spark a significant turnaround in investment habits — and not just in the United States.
“Last week’s US bears seem to have changed their mind with US$117m inflows, including US$26m from the United States,” CoinShares wrote in a Twitter thread accompanying the report.
“This is 3x the amount from last week. Total AuM had risen to US$28bn, up 43% from their November 2022 lows.”
Germany was the surprise leader, responsible for 40% of the week’s tally, followed by Canada.
Despite altcoins rallying in line with Bitcoin, however, institutions appear mainly interested in BTC when it comes to cash.
In the words of CoinShares, “the focus was almost entirely on Bitcoin,” a fact not lost on market participants eyeing a potential shift in preferences away from the Ethereum-centric decentralized finance arena.
“This is evidence that institutional money isn’t sold on the Ethereum thesis,” popular Twitter account Pillage Capital argued.
GBTC Sinks Towards New Record Discount
Meanwhile, after staging a marked comeback of its own, the largest Bitcoin institutional investment vehicle seems to be running out of steam once more.
The Grayscale Bitcoin Trust (GBTC) traded at a 43% discount to the Bitcoin spot price on Feb. 7, having recovered to 36.2% in mid-January.
As Cointelegraph continues to report, Grayscale currently finds itself caught up in difficulties impacting parent company Digital Currency Group following the disintegration of FTX in November 2022.
However, GBTC was already struggling, with Grayscale attempting to force U.S. regulators to allow it to convert to the country’s first Bitcoin spot price exchange-traded fund.
Bitcoin Tops $25,000 As Crypto Looks Past Regulatory Woe
* Bitcoin Last Traded At Or Above $25,000 Level In August 2022 * Tokens Are Rallying Despite Us Regulatory Crackdown On Crypto
A rally in Bitcoin took the token above $25,000 for the first time since August amid broad gains in crypto markets as investors shook off concerns about a US regulatory clampdown.
The largest digital asset rose as much as 3.4% to $25,002 as of 10:57 a.m. in New York. Smaller tokens such as Ether, Cardano and Avalanche also pushed higher.
A US crackdown on certain crypto products as well as a New York regulator’s move to end issuance of BUSD, the third-largest stablecoin, buffeted digital assets at the start of the week.
But they have since extended a rebound from last year’s rout, including a near-50% year-to-date climb in Bitcoin.
The momentum in crypto is likely making speculators close out bearish bets, further propelling the rally, said Cici Lu, founder of Venn Link Partners, a blockchain adviser.
“People forget the free float of Bitcoin can be limited at times and when shorts get squeezed the price just pops,” she said.
Some $64.5 million of short positions in Bitcoin were liquidated on Wednesday, the most in about a month, according to data from Coinglass. The liquidations came alongside a near-9% jump in the token on Feb. 15.
Crypto prices are climbing as global stocks advance. The latter have been boosted by bets that Federal Reserve interest-rate hikes can quell inflation without driving the US into a recession.
The risk for the sanguine mood in global markets is that investors are too complacent about how high rates have to go, as prolonged monetary tightening could damp demand for a variety of assets.