Bitcoin had its second-strongest January in its history — and the best since 2013 — rising nearly 40% amid widespread reports of institutional investors returning to the platform.
Zhong Yang Chan, head of research at CoinGecko, told Cointelegraph that there was “a net institutional inflow into digital asset funds in January 2023, especially in the past two weeks, with Bitcoin as the biggest beneficiary.”
Meanwhile, the CoinShares blog noted on Jan. 30 that total assets under management in digital asset investment products — a good measure of institutional participation — had risen to $28 billion, led by Bitcoin.
BTC
cursors down
$23,373
, which is up 43% from the November 2022 low in the current cycle.
The reasons for this bullish trend varied depending on who one asked, ranging from macro factors like a pause in inflation growth to more technical reasons like squeezing bitcoin short sellers. Elsewhere, a research report from Matrixport noted that institutional investors are “not giving up on cryptocurrencies,” further indicating that as much as 85% of Bitcoin buying in January was the result of US institutional players. The cryptocurrency services provider added that many investors used the January 12 print of the US Consumer Price Index as a “confirmation signal to buy bitcoin and other crypto assets.”
Almost all of the gains were during US market hours
But how did Matrixport attribute up to 85% of the monthly BTC growth to US institutional investors? As the Singapore-based company explained in its recent market review: “The most surprising statistic is that every +40% year-to-date rally in Bitcoin has occurred during US market hours. […] That’s 85% of Bitcoin movement. Matrixport continued:
“We have always operated on the assumption that Asia is led by retail investors, and the United States is led by institutional investors.”
So, if the Bitcoin market price rose during US market trading hours but fell during Asian trading hours, as it appears to be doing in January, one can assume that US institutional investors were buying Bitcoin while Asian retail traders were selling it – sort of a yin-and-yang. the job? Seemingly. Matrixport added that during US trading hours, “institutions, also known as ‘stable hands’, have been benefiting from dips.
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Is this really what drove the Bitcoin price so high in January? “In my personal opinion, the assumption that Asian investors and US institutional investors are the main drivers of Bitcoin net inflows is valid,” Keoni Hon, co-founder and CEO of Monad Labs — which developed the Monad blockchain — told Cointelegraph. There are other market participants, of course. But when looking at flows, it’s the “erratic flows” that have the biggest impact, Hun continued:
“In the current market, institutional players represent a potential new – or renewed – source of demand similar to early 2021. Meanwhile, on the retail side, Asia-centric exchanges such as Binance, Bybit, Okex and Huobi account for the majority of spot volume and nearly of all size derivatives.
However, others are not so sure. “There is no way to be sure that the US markets are led by institutional investors and the Asian markets are led by retail players because we don’t have data regarding who the traders are,” Jacob Joseph, research analyst at CryptoCompare, told Cointelegraph.
There is definitely a “feeling” or belief that there is a lot of retail interest in Asia, “especially in Korea, where the KRW is the fourth largest trading pair after USDT, BUSD and USD,” Joseph continued, but it really can’t be. quantify.
However, he acknowledged that the Matrixport report was interesting, adding: “Our data shows that more than two-thirds of BTC returns in January can be attributed to market hours in the US, and our hourly historical data also shows above-average trading volume during this period. hours “.
Justin Dianthan, director of institutional sales at Amber Group — a digital asset firm based in Singapore — told Cointelegraph, “I don’t really have the metrics to say whether or not 85% is OK.” He tended to see January’s rally as broad and macro driven, especially with inflation trending lower and expectations that the US Federal Reserve would not continue to raise interest rates. he added:
“You can see stocks, gold, real estate, and yes, cryptocurrencies. This is probably being driven by large institutions and smaller investors alike, especially when FOMO kicks in.”
D’Anethan also looked at Coinbase’s recent benchmark, “which is green but not overwhelming. This is usually a good metric for whether larger US entities are on a shopping spree. For now, it seems muted and positive, but maybe just Reallocate funds that were on the sidelines.”
The best way to measure American institutional activity, Jacob said, is to look at the exchanges “that serve them
