The first phase of Bitcoin The recent withdrawal did not trigger panic among institutional investors, according to crypto asset management firm CoinShares.
Professional distributors reduced their exposure slightly but largely maintained their positions compared to last year. Advisors have reduced their holdings while hedge funds have reduced their shares alongside reducing broader leverage and shifting opportunities to other markets, the crypto investment manager said in a Tuesday report.
Long-term investors continued to accumulate. “Endowments, pensions and sovereign securities continued to grow quietly,” wrote analyst Matt Kimmell.
Bitcoin has struggled to regain momentum since hitting an all-time high near $125,000 in early October. The world’s largest cryptocurrency was trading around $72,370 at press time.
Crypto markets have performed subdued in recent months as a mix of macroeconomic and market-specific pressures have weighed on prices. Rising interest rates and a stronger dollar dampened appetite for risky assets, while leveraged positions built earlier in the recovery were unwound. At the same time, profit-taking by long-term bitcoin holders and uneven flows into spot exchange-traded funds (ETFs) have limited momentum, leaving the sector struggling to return to a sustained uptrend.
Although bitcoin fell about 23% during the period, global bitcoin ETF flows remained positive, suggesting that the fourth-quarter selloff was more due to profits from long-time holders than the exit of new institutional funds from the market, Kimmell said.
Historically, cryptocurrency bear markets have redistributed supply from short-term traders to long-term holders. According to Kimmell, the emergence of ETFs now offers a new way to observe whether institutional capital follows the same pattern.
So far, the data points in this direction. A quarterly drawdown of around 25% did not trigger broad institutional capitulation, the report said, with most declines in assets under management reflecting price movements rather than mass investor outflows.
CoinShares nevertheless cautioned that the sample size remains small. The company said the real test could come in upcoming regulatory filings, which will take into account institutional behavior during sharper moves, including Bitcoin’s fall toward $60,000 and a 17% single-day decline.
Bitcoin and the broader crypto market rose this week, rebounding after weeks of choppy trading. The rally was driven in part by a renewed risk appetite in markets and continued demand for Bitcoin ETFs, helping the largest cryptocurrency regain momentum and lift major altcoins alongside it. Traders also pointed to short covering and positioning resets following the recent sell-off as factors behind the move.
Learn more: CEO of crypto investment firm Keyrock says bitcoin is undervalued and entering a ‘year of transition’
