Institutions are buying less Bitcoin again – what’s next?
The last few weeks have been tough for crypto bulls as Bitcoin and the broader crypto market continued to sell off. Since hitting an all-time high of $61,500, Bitcoin plunged 16% in a matter of weeks, losing $100 billion in market cap.
However, the main cryptocurrency showed signs of life when Elon Musk’s tweet pushed prices back up to $56,000.
This was to prove insufficient, however, as Crypto Bull Bitcoin continued to plummet and returned to the $51,000 range. After several days of losses, bearish sentiment set in; investors and speculators began to prepare for losses, fearing that the correction was far from over.
Today, however, the market breathed a sigh of relief, with Bitcoin up 6% and back at $54,900. The tech index NASDAQ also cut its weekly losses, rising 1.4% by Friday’s market close – helping to build Bitcoin’s intraday momentum.
What’s in store for Bitcoin in April?
More importantly, selling pressure has likely eased, thanks to a record $6.4 billion in options expiring today. According to DeriBit’s figures, the price expectation for Bitcoin in April remains higher than in March.
As the April 30 contracts had a put/call ratio of 0.80 at the time of writing, investors seem to be more bullish than before.
Interestingly, a majority of investors were betting on Bitcoin ending April above $80,000. This particular strike price represents 12.6% of the total open interest (4842 out of 38283) and is the most popular call strike price. On the other side of the trade, the $50,000 put strike price represented 10.1% of the total open interest.
At first glance, it is clear that the options market has priced in bullish sentiment for Bitcoin – yet. This can change, of course, depending on various factors such as catalysts, the stock market, regulations and more.
Institutional inflows slowing – cause for concern?
With Bitcoin’s recent price performance and extreme volatility, many institutions that were previously interested have likely been scared off. According to a report by CoinShares, institutional demand for Bitcoin investment products dropped in the last weeks of March.
According to the report, institutional inflows dropped by almost 60% in a single week.
Nevertheless, it is likely that institutions will start buying more bitcoin again when bitcoin stabilises. One of New Zealand’s pension funds recently announced that Bitcoin makes up 5% of its investment holdings.
Temasek, Singapore’s $306 billion sovereign wealth fund, also revealed that it has been accumulating the digital currency since 2018.
Major investment bank Goldman Sachs has also remained bullish on the cryptocurrency and plans to create its own financial products that track Bitcoin (go here for market overview). In summary, the recent decline in institutional inflows is not a worrying sign in the long run.