Bitcoin’s price broke above the February 2023 highs of $25,200 after U.S. inflation data was in consensus with the market expectation. The potential fallout of the global banking system further promoted Bitcoin investment as a non-correlated global hedging instrument similar to gold in March. The correlation between gold and Bitcoin has been rising since the start of the month.
However, institutions have become net sellers of Bitcoin in 2023, which raises some red flags. Bitcoin whales — wallets holding between 10 BTC and 10,000 BTC — have not participated in the current rally. It appears that retail investors are mainly driving the uptrend. The divergence between whale and retail investment could cause a short-term pullback in Bitcoin prices.
Institutions are forced BTC sellers, says analyst
Institutional crypto asset flows data from CoinShares reveals the largest two-week sell-off from investment funds since March 6. The outflows have erased the positive inflows for this year, with the net year-to-date flow equalling negative $177 million.
CoinShares’ data tracks the portfolio of global institutional funds with digital asset exposure, including Grayscale, CoinShares XBT, 21Shares, Purpose and 3iQ.
James Butterfill, CoinShares’ head of research, notes in the report that the flows “may be driven, in part, by the need for liquidity during this banking crisis, a similar situation was seen when the COVID panic first hit the market in March 2020.”
Butterfill’s theory about forced sell-offs by institutions may have some credibility, as on-chain analytics firm Santiment informed Cointelegraph that it “do[es] not currently see major whale sell-offs at this time. Bitcoin addresses holding 10-10,000 BTC have remained essentially flat.”
It is encouraging that whales are not looking to sell the current rally. However, as the prices continue to rise, the asset will require whale buyers to join the bandwagon — otherwise, the rally could fade soon.
Additionally, the recent depegging of USD Coin and the regulatory crackdown on Binance USD have likely caused a minor whale exodus from stablecoins. Santiment reported that “addresses holding between $100,000 to $10 million in stablecoins have been dropping slightly, but not to a notably high degree.”
A flow of stablecoins to Bitcoin and other cryptocurrencies is positive for prices. However, large-scale conversions from stablecoins to dollars weaken the market’s buying power. The lack of growth in whale BTC holdings suggests that the flows represent more of the latter situation.
