It is a fact that institutional investors who had purchased Bitcoin this year would be facing substantial losses, which would remain unrealized unless they decide to sell off their holdings. The pioneer cryptocurrency’s correction continues steadily and the losses over the weekend indicated that it had hit almost 50% of the value of its all-time high of $63,500, which it had reached in mid-April. However, market participants, and these include institutional investors, certainly cannot complain that they weren’t warned because many prominent investors and commentators had declared that Bitcoin was in a bubble and it wouldn’t be long before it would go bust.
Regardless, the boom of cryptocurrencies seen in the first quarter of the year had attracted the attention of numerous institutional and retail investors and they had joined the market. After the boom went bust, a number of retail investors had frantically begun to sell off their holdings before the prices go down even more. The increasing losses that they are suffering because of the outsized volatility of the market, even by regular crypto standards, has provided an excellent opportunity to Bitcoin critics to re-emerge. They always had bearish opinions about the cryptocurrency but had remained quiet during the astronomic increase in the price of Bitcoin.
As stated above, a lot of institutional investors had also been attracted to the market, as they were trying to tap into the massive returns it was offering. One of the prominent institutional investors in Bitcoin was none other than Tesla. The company announced in March that they would be accepting Bitcoin as a means of payment when Bitcoin had been doing quite well. The company had also expanded their Bitcoin Treasury holdings and they had gone up to as much as $2.5 billion. But, in early May, the company announced that they were halting Bitcoin payments and this proved to be one of the triggers of the crash.
MicroStrategy is another institution that has large crypto holdings. Recently, the company had a funding round and bought 90,000 BTC with it. It has some big investments in Bitcoin. Other Wall Street companies have also begun to open up to cryptocurrencies by offering custody and execution services. The increase in institutional investors was not a free choice for many and only the increase in demand by clients pushed companies into getting into the market. However, unlike retail investors who are selling their crypto holdings, their institutional counterparts are doing the complete opposite and actually purchasing the dips.
The data indicates that there is a significant increase in Bitcoin outflows, which indicates that there is an increase in the accumulation of the token. Likewise, there was also an increase in the exchange inflow for USDC, which showed that investors were ready to make additional crypto investments. The primary question is who is purchasing the dip. It appears to be institutional investors, which include a number of hedge funds like Three Arrows Capital, ByteTree Asset Management, and MVPQ Capital, all of whom seem to have increased their BTC holdings.