Are The Institutions Gone? - MONDAY ON-CHAIN


Hey DEFI TIMES community,

Bitcoin’s price movement in the last months was mainly due to institutional investors. There’s a long list of big investors that already have Bitcoin on their balance sheet:

  • MicroStrategy

  • Tesla

  • Galaxy Digital Holdings

  • Square

  • Paul Tudor Jones

  • MassMutual

They all have one thing in common: They see Bitcoin as a hedge against inflation and uncertainty. Michael Saylor, CEO of MicroStrategy, believes that Bitcoin is one of the few assets outperforming the M2 money supply, and he is right.

Gold has constantly lost against M2, which is why more and more institutions are investing part of their balance sheet in Bitcoin. Or do they?

After Tesla announced their Bitcoin purchase, no single company joined the Bitcoin party. It seems like we are experiencing an institutional drought. Why is that so?

The best way to analyze institutional interest is to look at Grayscale’s activity. Do we see a net inflow or outflow of funds? What does it have to do with the Grayscale premium? It’s also helpful to consider how well the Canadian ETF is doing!

Let’s take a look at the numbers!


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Where are all the institutions?

What’s Grayscale doing?

Take a look at the Grayscale Bitcoin holdings. As you can see, the last significant increase in their Bitcoin holdings was on February 18 - just a few days before the correction started. 

And if you look very closely, you even see that Grayscale has experienced a net outflow of bitcoin out of their trust. 

Since February 18, Bitcoin has been leaving the Grayscale trust. 

Another important thing to consider is the Grayscale Premium. On February 23, the Grayscale premium turned negative for the first time ever! Are Grayscale investors bearish on Bitcoin?

We don't know for sure; however, the negative Grayscale premium is a pity for many Bitcoin yield companies like BlockFi. Until mid-February, BlockFi used the Grayscale premium to earn yield for their users. Now, this strategy isn't helpful anymore. BlockFi depended so strongly on this strategy that there are even rumors that the company has gone bankrupt - only rumors, though...

Why is it important to look at the Grayscale inflows/outflows? Well, because institutions are their main clients. And apparently, Grayscale’s institutional clients have been rather bearish since mid-February - not a good sign.

What about the Canadian Bitcoin ETF?

Of course, Grayscale is just not the only metric to consider. Let’s take a look at another important metric: The Canadian Purpose Bitcoin ETF.

Bitcoin ETF investors seem to be accumulating less bitcoin than one month ago. Right now, almost 15,000 bitcoin are sitting inside the Canadian Bitcoin Purpose ETF.

Sure, daily inflows are not as high as they were when the ETF first launched. The growth rate has been declining since its launch. Institutional interest seems to be correlated with the price movement.

…And MicroStrategy?

Let’s take a quick look at MicroStrategy. Just as Grayscale and the Purpose ETF, MicroStrategy stopped aggressively buying Bitcoin. And the interesting thing is MicroStrategy stopped buying Bitcoin at the same time as Grayscale: mid-February!

We see one thing throughout the primary Bitcoin funds/trusts: The growth rate is not picking up the momentum we saw in February. Overall, we see kind of a pullback of bullish news stories. After Tesla announced their Bitcoin purchase in February, no major (well-known) institution announced they would enter the industry. 

Why is that so? And what could this mean for the Bitcoin space? Are we in a healthy correction, or does this mean that...institutional investors are losing faith in Bitcoin?

Where are all the institutions?

So major institutions are not picking up the momentum we saw in February. Grayscale, the Purpose ETF, and MicroStrategy are just a few examples of the overall situation. The question is now whether or not these institutions are losing interest in Bitcoin.

Well, probably not. First of all, you should know that companies like MicroStrategy or Tesla are heavily regulated, which means that any decision needs to be approved several times in different departments. Especially controversial choices, like putting bitcoin on a balance sheet, need time to be approved.

This fact could be one of the reasons why institutions are not currently buying bitcoin. Maybe many companies are planning to invest in bitcoin right now - but they might be stuck in the process.

I'm sure many companies are exploring the possibility of buying bitcoin right now. Elon Musk is leading the way; however, they cannot invest in bitcoin overnight. It takes time.

It's been one month since the last major company announced its entry into crypto, and the price has been lagging since. In my opinion, it's super interesting to observe human psychology in the crypto markets. The crypto market strongly depends on positive news. When no major report is released, we see a pullback in price. That's exactly what happened during the last couple of weeks.

So don't worry during times like these. Prices strongly depend on news stimulus, which has been lagging for quite some time. But we are in a bull market right now, and the bullish news stories will come back eventually. More institutions are following Tesla's and MicroStrategy's example. Prices will reflect that when the time comes.

Conclusion

The recent price pullback is due to the lack of bullish news stories and companies' announcements buying bitcoin. For me, this is just noise. Of course, we cannot expect world-changing news stories every single week. Crypto doesn't work like that - even in a bull market.

To answer the question, we started with: No, institutions are not gone. They just need more time. The fact that MicroStrategy, Grayscale, and the Bitcoin ETF are not picking up February's momentum is just… a dip - and dips are typical in bull markets. 

In crypto, price and news stories are very much correlated. Always keep that in mind. Price increases lead to more news stories, and more bullish news stories lead to rising prices - a self-fulfilling prophecy. However, this cycle can also work the other way around, which we see right now.


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All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.

Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.