Institutional Investors Propel Optimism in Bitcoin, Rebound After Price Bottom
Although Bitcoin floundered around the halving, a price bottom has turned into slow recovery. New data suggests that institutional investors are powering Bitcoin’s comeback.
Despite several setbacks in the world of Bitcoin post-halving, the first cryptocurrency’s price has rebounded slightly after suggestions that the current cycle hit bottom.
Bitcoin’s been having something of a chaotic month. Days before the halving on April 19th, the leading decentralized currency hit its all-time peak in a trend that bucked all pre-established trendlines of Bitcoin halving behavior. Several factors in the broader market, combined with this unusual behavior and confidence, seemed to pull back dramatically alongside Bitcoin’s price. Even though several related industries continued to show the same determined attitude and faith in Bitcoin, dollars still seemed to be flowing away from ETF offerings and the entire Bitcoin ecosystem. Something about this particular cycle was simply peculiar.
Generally, the trend for the halving involves an immediate and sustained period of market doldrums over a few months, after which point the price hits a new all-time high. This time, however, the extremely early peak apparently meant that the week before the halving saw dramatic decreases. Bitcoin’s price did recover slightly upon the halving, but plummeted even further beginning on the following Monday. Nevertheless, by May 2nd, there were several signs suggesting that Bitcoin’s decline had finally bottomed out. How certain can we be of that? Why did this whole saga unfold, and what will Bitcoin’s regrowth look like? All these questions and more were floating around as the reports began coming in.
One aspect of this price cycle that seems inescapable is the disproportionate role that institutional investment plays in Bitcoin’s fundamental dynamics. For example, although JPMorgan has publicly been cautious about actually investing in Bitcoin at the moment, their analysts came to an interesting conclusion: it’s actually individual retail investors, not corporate actors, that poured gasoline on this price decline. During the same period that most institutional Bitcoin sell-offs had been “momentum traders such as commodity trading advisors (CTAs) or other quantitative funds taking profit on previous extreme long positions” in Bitcoin, JPMorgan analysts claimed that private individuals were showing big outflows for Bitcoin and related derivatives like the Bitcoin ETF.
The main goal of Bitcoin spot ETFs was to allow new sources of investment that had never been able or inclined to buy Bitcoin, a new way to directly profit from its appreciation. It seems that this plan has definitely worked, as BlackRock reported on May 2nd that unusual new institutional investors were showing some of the most interest in their own ETF offering. Robert Mitchnick, BlackRock’s Head of Digital Assets, said in an interview that as diverse buyers as “pensions, endowments, sovereign wealth funds, insurers, other asset managers, family offices—are having ongoing diligence and research conversations, and we're playing a role from an education perspective." Although he did not list any concrete sales numbers, several of these certainly qualify as investors who would never directly buy Bitcoin. This isn’t just a statement about their possible dislike for it, but a legal reality, as many of the listed entities would simply not be able to play the market.
With the ETF, however, doors have been opening. These doors extend to institutional levels at practically all levels of the country and even players on the international stage, as BNP Paribas, the second-largest bank in Europe, has also been investing in BlackRock’s ETF. These sales were discovered by SEC filings for Q1 2024, and although their purchase has been small, it’s nevertheless very important that major institutions like this were putting money in while private customers were taking money out. In a particularly telling episode, Fidelity even predicted that Bitcoin had finally matured during its 15 years of operation and has now reached a level of acceptance in the finance world that its volatility is permanently on the decline. Analysts claimed that Bitcoin was currently more stable than dozens of high-performing companies on the NASDAQ and even made this claim while Fidelity’s own ETF was losing more money than anyone!
In this context, it makes a little more sense that a few reassuring factors for individual actors have led the money to start coming back in. The Federal Reserve announced on May 2nd that it would not be changing interest rates, and Bitcoin’s price saw an immediate rebound. Mr. 100, an anonymous whale known for purchasing 100 bitcoins on a daily basis until the halving, made up for lost time with a staggering new acquisition: 4100 bitcoins, worth more than $240 million. This bold purchase was like a starting gun for some of Bitcoin’s biggest whales, as big buyers gobbled up more than ten times that amount in the following 24 hours. Bitcoin has hardly returned to its all-time heights, but it certainly seems like the recovery has begun.
Indeed, it may actually take a fair bit of time for Bitcoin to really hit the skyrocketing numbers that users may expect. Arthur Hayes, former BitMEX CEO and prominent community member, cautioned Bitcoiners that a “slow grind” may take place over the next several months as Bitcoin recovers. This, at least, will remain in line with some of the halving-related trends that have taken place thus far. Still, some of these implications do seem disconcerting from the perspective of Bitcoin maximalism in the long term. Bitcoin has suffered through several very serious setbacks over the years, frequently caused by the domino effects of one prominent leader failing. These events have been considered growing pains, but are we really ready to trade this world for one where global markets power the crashes?
Some may even consider it a defeat for Bitcoin’s overall vision if institutional investment has managed to tame a decentralized economic model that seeks to revolutionize the whole world. To those who fear that Bitcoin’s new financial acceptance may be ruining it, I invite them to look at the scale of recent events. It’s true, Bitcoin has been behaving in a totally unprecedented way after this halving, and it looks like corporate dollars are the cause. However, these events have still remained relatively small-scale for all that they are new. There have been several instances where Bitcoin lost half of its value in a roughly three-month period, while the price drops in 2024 have been a drop in the bucket. That kind of chaos, too, is perfectly normal for Bitcoin. It’d be jumping the gun to claim that this unusual month is indicative of total centralization for our decentralized currency—a corporate capture with irreversible effects.
Besides that, although the ETFs have certainly opened new doors into the world of Bitcoin, the world itself is still full of the same entrepreneurs and innovators that it has always relied on. Developers are working on completely novel directions for Bitcoin’s future, and the actions of small players are able to resonate. As we move into what looks like an uncertain future, it does seem certain that we can continue to rely on Bitcoin. It’ll be the entire community that takes Bitcoin to the moon, and the world will have to adapt along with it.
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