By Lisa Pauline Mattackal and Medha Singh.
Related: US dollar hit a 20-year high yesterday. Five Bitcoin facts this week:
Who has the ability to preserve bitcoin?
The largest cryptocurrency on the planet cannot seem to catch a break. It finally appeared to be regaining strength this month, surpassing $25,000 for the first time since its collapse in June, only to regress to near $20,000 the following week.
August’s low prices have forced the market to ask the Big Bitcoin Question: where will a real rally come from?
In the middle of a macro storm, brave individual investors seem to be the most likely source of relief, while institutional players lose their nerve.
The quantity of “illiquid bitcoin” held by wallets that seldom spend or sell has increased by 73,840 bitcoin over the past week, according to statistics from Chainalysis. This is the greatest weekly gain in more than two months. This is equivalent to almost $1.7 billion at current pricing.
In addition, the quantity of bitcoin held for over a year has climbed by an average of 54,300 in the previous four weeks, the greatest gain in almost four months, according to Chainalysis. According to Arcane Research, cryptocurrency exchanges have experienced net outflows for three consecutive months as investors have moved their tokens into “cold storage” rather than selling them.
The number of wallets holding relatively small quantities of bitcoin is undoubtedly increasing, according to Jay Fraser, the head of strategy at the BSTX securities exchange. “It’s evident that individual investors with longer-term holdings are also acquiring them,” he added.
Related: Synthetix intends to turn off the SNX money printer for good.
“Don’t underestimate the significance of retail HODLers,” Fraser cautioned, alluding to a group whose term originated from a trader’s misspelling of “hold” on an internet forum some years ago. “Their reluctance to sell adds to the fact that there are fewer bitcoins, which means that a supply shock for bitcoin will happen again.”
INSTITUTIONS ‘DRIVE THE MARKET DOWN’
What about the institutional players with vast pockets that hopped on the cryptocurrency bandwagon when prices were high?
Several market players say that they have been selling a lot and that this is the main reason why the crypto market has been going down over the past few months.
The digital asset investment instruments favoured by traditional institutional financial players had almost $9 million in withdrawals during the week ending August 19—the week in which bitcoin fell again.
Ed Hindi, the chief investment officer of Tyr Capital Partners, said that institutions that got into the market at its peak, or between $30,000 and $50,000, were mostly to blame for driving the market down.
Hindi said that another sign of institutional pessimism was the big difference between the prices of futures contracts and the current price of bitcoin on the CME platform.
Analysts at Arcane Research say that the discount for the contract that is traded the most reached a record low of 3.36 percent last week.
“READY TO PURCHASE THE DIP”
There is a lot of evidence that institutional players are still interested in bitcoin, even though its price has dropped by 56% since the beginning of 2022 and is down 70% from its all-time high of $69,000 in November.
The move by BlackRock (NYSE:BLK), the world’s largest asset manager, to introduce a private bitcoin investment product for institutional investors is viewed by some market observers as a strong indication that demand is robust and might pull cryptocurrencies out of the doldrums.
Related: bitcoin price prediction 12 Augest 2022
Andy Edstrom, the managing director of Swan Advisor Services, said that despite “seasonal interest” waning, his company has seen financial advisers and their clients still interested in investing in bitcoin.
“Some advisors are prepared to purchase in the downturn, telling us, ‘I’ve got cash to invest in bitcoin at $20,000,'” he continued.
