2022年1月17日

Bitcoin peak wild dance: institutional admission slightly cautious retail bearish duel trend fierce

As of 18:55 a.m. on March 16, each bitcoin was trading at $55,952.52.

The market hasn’t yet digested the record of $50,000 per bitcoin, which hit $60,000 for the first time this past weekend, at one point hitting $60,415.34. As the market struggled to understand the psychological level of $60,000 and repeated similar swings, Bitcoin once again retreated from its high to hit the $46,000 mark.

Beneath the surface, what are the subtle ups and downs of investors’ money moving in and out?

Institutional player advance and retreat rhythm changes

Bitcoin is up more than 100% so far this year and nearly 20-fold from the same period last year. Looking back on this journey, Bitcoin plays a similar “roller coaster” story.

On March 14, when most financial trading institutions were resting, shortly after breaking through the $59,000 mark, Bitcoin crossed the psychological level of $60,000 and hit $60,415.34 on the day, with a total market capitalization of more than $1.1 trillion, more than 60% of the total global cryptocurrency market capitalization.

But the new high appears to be short-lived.

On March 15, the price of Bitcoin retreated from its high and fell by more than $5,000, returning to the $55,000 level. It then fell below $54,000 again on March 16. According to the public information combing, the market value of Bitcoin fell by 4.674 billion US dollars in 24 hours, and more than 130,000 people exploded in 24 hours.

In response, a Bitcoin veteran told reporters that a sharp pullback in the bull market is a normal situation. “If you take a stock, for example, it falls 20 per cent from its peak, it’s called a technical correction. “The decline from $58,000 per coin traded in early February all the way down to around $40,000 is a major pullback, and this decline can also be interpreted as a technical pullback or volatility.”

“There are a lot of factors that are going to determine bitcoin’s decline. According to pure rational market logic, bitcoin will rise every day due to its nature, but in reality, it cannot keep rising, “he said, adding that” there is always a long/short game in the market, but in general, large fluctuations are usually caused by large institutions and large funds.”

So, behind this wave of market, contains what subtle long short logic?

In the view of the veteran bitcoin investor, while the push to around $60,000 was driven by a combination of factors, it had little to do with retail or individual investors. Institutional investor Grayscale alone has bought tens of billions of dollars in bitcoin, not a trend that individual investors can shape.

As 21st Century Business Herald continues to watch, Tesla (TSLA), MasterCard (Mastercard), Square, PayPal (PAYPAL) and others are gaining ground in the Bitcoin space. Meitu, J.P.Morgan (JPM), Goldman Sachs (GS) and Morgan Stanley (MS), among others, are working on bitcoin placements.

Maintaining a bullish view, MicroStrategy, a veteran bitcoin player, is still buying bitcoin. Since March, MicroStrategy has announced two purchases of bitcoin for $15 million and $10 million. As of March 15, 2021, the company had purchased about 91,326 bitcoins at a total purchase price of $2.21 billion, taking its holdings to more than $5.1 billion, according to Bitcoin Treasuries data.

Separately, Technology company Digihost Technology and Seetee AS3, a unit of Norwegian holding company Aker ASA, increased their bitcoin holdings to 184 and 1,170 coins respectively in February and March.

LedgerPrime, a digital asset investment company, has sold $49.5 million worth of securities to invest in Bitcoin and Ethereum, according to SEC filings disclosed this week.

In addition to directly increasing bitcoin holdings, the Grayscale Bitcoin Trust (GBTC) appears to be the new standard allocation for investors.

Digital Currency Group(DCG), the parent company of Grayscale, officially announced on March 10 that it plans to purchase GBTC with a value of $250 million. Information about stock purchases will be reported to the SEC on a regular basis. On March 11, it was revealed that Israeli investment giant Altshuler Shaham had invested $100 million in GBTC at the end of last year, thereby gaining Bitcoin exposure. By 2020, its assets under management (AUM) exceeded $50 billion.

After launching a bitcoin ETF in Canada, asset manager WisdomTree Investments has filed an application with the SEC to launch a bitcoin exchange traded fund, pending approval. Anthony Scaramucci, a former White House economic adviser and founder of hedge fund SkyBridge Capital, predicted on March 12 that bitcoin ETFs could be approved in the United States by the end of the year, after SkyBridge Capital launched a bitcoin fund in early January with $182 million invested in the currency.

As Bitcoin continues to soar to new highs, the balance of funds between individual investors and institutions is poised to go head-to-head after a number of global financial institutions emerged as the dominant players in the sector late last year. According to new data from JPMorgan Chase, retail bitcoin inflows are on track to exceed institutional inflows in the first quarter of this year.

Nikolaos Panigirtzoglou and other J.P. Morgan strategists noted in their latest report that retail investors have bought more than 187,000 bitcoins so far this quarter, using Square and PayPal data as a guide. That compares with about 205,000 in the last quarter (the fourth quarter of 2020). Institutions bought about 173,000 bitcoins during the same period, compared with nearly 307,000 in the last quarter.

Retail funds advance and retreat fiercely

So far, the attention and recognition of the large and small institutions for Bitcoin is still gradually increasing, constantly entering the board, sometimes increase holdings, funds continue to flow into the Bitcoin market, but has been cautious, while the retail funds show the strength of the potential.

Both institutional and small investors are buying bitcoin against the backdrop of rising global inflation expectations, Eucco Cloud Chain Research Institute said in an interview with the 21st Century Business Herald. It has never been seen that the global economic recovery and the tone of loose monetary policy will not change significantly until this autumn at least. In particular, the fiscal policies of countries such as Europe and the United States, which directly distribute cash subsidies to the public, will only make more small and medium-sized investors flood into the Bitcoin market.

“For individual investors trading cryptocurrencies, Bitcoin was the primary channel of investment during COVID-19. Bitcoin has maintained a surprisingly bullish trend amid the apparent volatility of stock trading, making most investors winners, “said Ed Moya, senior market analyst at Oanda Corp.” Overriding the bailout checks from the stimulus package, individual investors are reenergized by the boom in emerging cryptocurrency trading.”

Pepperstone Group Ltd., a foreign exchange broker. Research director Chris Weston also noted in his report that there has been an influx of money from the outbreak stimulus package into cryptocurrencies such as bitcoin, which needs to stay above its high of just over $58,000 to support confidence in its new bull market.

But even if more retail investors enter bitcoin, it will still be a long way from the massive increase in holdings by institutions.

“It’s mostly institutions that are increasing their holdings, but they’re actually buying less at the same time.” “With the exception of Grayscale, most institutions don’t buy more than 1% of their assets under management today,” the senior bitcoin insider explained. “Institutions are not significantly overweight bitcoin, but as long as they continue to add a little bit more, the price will continue to rise.”

But he also pointed out that compared to individual investors, large and small institutions tend to be more aware of the wind and sensitive, because currently there is no strict and clear regulations in the country, the overall trend of bitcoin is rising. “But if the U.S. or other countries actually put in place regulations on cryptocurrencies, including bitcoin, the market could very well halve or evaporate.”

Yu Jianing, chairman of the Blockchain Special Committee of China Communications Industry Association and president of Huobi University, said in an interview with the 21st Century Business Herald that as the bull market continues, the power of retail and institutional funds is still increasing. “As the early rise is large, so many institutions in the admission time selection will be more cautious, so from the current increase in funds and users of the incremental proportion of retail investors is relatively high, but this does not change the future market will be dominated by the basic pattern of institutions.”

In terms of the comparison between retail investors and institutions, Oke Cloud Chain Research Institute believes that the investment behavior of institutional investors is more rational. Institutional investors enter the digital currency market mainly to allocate digital currencies such as Bitcoin as assets, and will not chase after the rise or fall, but frequently buy and sell. The investment behavior of small and medium investors is generally called “noise trading”, which is reflected in the market as “chasing after the rise and killing the fall”, frequently buying and selling.

“As a result, the average institutional investor determines the medium to long term direction of the market, while the ‘noise trader’ mainly influences asset prices in the short term. When the market is dominated by ‘noise traders’, the market is prone to’ irrational ‘exuberance and the subsequent bursting of asset bubbles.” Oke Cloud Chain Research Institute said.

In addition, Oke Cloud Chain Research Institute believes that institutional investors are easy to form a demonstration effect on small and medium-sized investors. When star investment institutions buy bitcoin, small and medium-sized investors will follow them to buy one after another. “The most obvious example is the back-to-back statements of Musk, the father of Tesla. On January 29, 2021, after Musk changed his Twitter signature to ‘# Bitcoin’, a large number of Musk’s ‘fans’ began flooding into the Bitcoin market. Bitcoin immediately jumped 18% to the $38,000 mark. When Tesla announced on February 8 that it had bought $1.5 billion in bitcoin, bitcoin rose more than $7,000 in a single day to more than $47,000.”

In Yu’s opinion, the investment characteristics of institutional investors and individual investors determine that they will have different influences on the price trend of Bitcoin.

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