© Reuters. FILE PHOTO: Representatives of the cryptocurrency Bitcoin are seen in this illustration, Aug. 10, 2022. REUTERS/Dado Ruvic/Illustration
By Lisa Pauline Mattackal and Medha Singh
(Reuters) – Who can save bitcoin?
The world’s largest cryptocurrency is unlikely to break out. Finally, it appears to be regaining strength this month, breaching $25,000 for the first time since crashing in June, only to retrace towards $20,000.
A deflation in late August forced the market to face the Big Question: where will a real recovery come from?
Right now, powerful retail investors are looking like the most likely source of relief, as institutional players cool off in the midst of a macro crisis.
The number of “illiquid bitcoins” in the market – held by wallets that are rarely spent or sold – has increased by 73,840 bitcoins in the past week, the biggest weekly gain in more than two months, according to Chainalysis data. That equates to about $1.7 billion at recent prices.
Furthermore, bitcoin holdings over a year have increased by an average of 54,300 over the past four weeks, the largest increase in about four months, Chainalysis said. Meanwhile, crypto exchanges have seen net outflows for three straight months as investors withdraw their tokens into “cold storage” instead of selling, according to Arcane Research.
“It is clear that long-term holders at the retail level are also accumulating, the number of wallets holding a relatively small amount of real bitcoin,” said Jay Fraser, head of strategy at stock exchange BSTX. the increasing.
“Don’t underestimate the impact of retail HODLers,” added Fraser, referring to a named cohort that emerged years ago from a trader who misspelled “hold” on an online forum. line. “Their failure to sell will create more scarcity, so eventually a supply shock to bitcoin will flare up again.”
STRUCTURE ‘DOWN MARKET’
What about institutional players with deep pockets who jumped into the crypto race when prices were high?
They sold heavily, with several market participants saying that these large investors were the main driver of the cryptocurrency’s drop in recent months.
In the week to August 19 – the week that saw bitcoin slide again – digital asset investment products favored by traditional institutional financial players saw inflows of approximately $9 million according to Coinshares data.
“The latecomers — institutions that were close to hitting the top or $30,000 to $50,000 — they were the ones driving the market down,” said Ed Hindi, chief investment officer at Tyr Capital Partners. Hindi, chief investment officer of Tyr Capital Partners said.
Hindi points to a sharp drop in price between futures and spot bitcoin prices on the CME exchange as further evidence of institutional decline.
The discount for the most traded contract hit an all-time low of 3.36% last week, analysts at Arcane Research say.
‘SN IS READY TO BUY CAT’
But don’t count institutional players – there’s plenty of evidence that they haven’t given up on bitcoin, down 70% since hitting an all-time high of $69,000 in November and have lost 56% from the beginning of 2022.
Some market watchers see the decision by BlackRock (NYSE:), the world’s largest asset manager, to launch a separate bitcoin investment product exclusively for institutional investors as a sign Strong demand suggests that demand remains strong and could pull the cryptocurrency out of the doldrums.
Andy Edstrom, chief executive officer of Swan Advisor Services, said his firm has continued to see interest from financial advisors and their clients in bitcoin investments despite some “interesting”. reasonable weather” is gone.
“Some advisors were ready to buy back, they told us ‘I have dry powder to invest in $20,000 in bitcoin’,” he added.