- According to Matrixport, 85% of Bitcoin buys have been by USA-based institutions
- 85% of Bitcoin buys responsible for the Bitcoin surge have occurred in the window consistent with United States working hours
- Improved Bitcoin adoption by institutional players will undoubtedly boost the hopes of Bitcoin enthusiasts
An interesting trend has emerged as the crypto winter shows signs of abating. Leading cryptocurrency Bitcoin, which crashed from its 8 November 2021 all-time high of US$67567 to close 2022 at US$16547.50, has put an impressive 40% in January 2023. According to Matrixport, 85% of Bitcoin buys have been by USA-based institutions. BTC enthusiasts are bullish on prospects for the leading cryptocurrency in 2023.
Bitcoin Bulls are back in town
At the time of writing, BTC is trading for US$23249.60, representing a year-to-date surge of 40.01%. BTC has given holders something to celebrate after being ravaged by the crypto winter that coincided with crashes in many equity markets worldwide. Analysts now predict Bitcoin may peak at around US$32000 in 2023. In the near future, analysts tout Bitcoin to rise as high as US$137000. That would represent quite a recovery and then some.
Bitcoin enthusiasts had their resolve tested in 2022. Predictions amongst promoters were for the cryptocurrency to scale the US$100000 barrier. The cryptocurrency ultimately fell short instead of succumbing to a crypto winter that claimed many casualties. Instead, BTC fell below the US$20000 mark for the first time since December 2020. Bitcoin wasn’t the only victim of the crypto winter, as other major cryptos and altcoins all felt the chill. International equity markets, too, felt the chill as cryptocurrency proved to have a stronger correlation with traditional capital markets.
Trading platform Matrixport reports that 85% of Bitcoin buys come from USA Institutional players. This statistic suggests that United States-based Institutional investors are bullish on the leading cryptocurrency in the early activity of 2023. This is consistent with other trends that have been observed in the recent past, suggesting that cryptocurrency is gaining popularity with institutional investors.
We’ve seen a lot of activity in the USA that suggests the trend. A US bill was tabled to allow cryptocurrency investments in retirement savings plans known as 401ks. We’ve also increased adoption to the mainstream of cryptocurrency price data with popular social media platform Twitter now showing cryptocurrency price charts within the platform. Stock market and ETF ticker symbols were simultaneously given the same functionality.
The Matrixport method
How does Matrixport measure this? A look at their Twitter thread below details that they looked at BTC trading data and matched the trading volumes to the times they were executed. Matrixport hypothesizes that institutions trade during working hours, when individuals are not bound by working hours. So, analysing the timing of the trades, we can see which hours the most trading of a cryptocurrency or any asset is done. Then seeing which country’s business hours best match the activity. Distinctions can be drawn for any cryptocurrency showing whether they are most prevalent during American, European, African, or Asia-pacific business hours.
📈🚨 US institutions are driving the #Bitcoin rally, accounting for 85% of buying
Strong returns during US trading hours point to institutional investors being the buyers
📊 Will this trend continue?
Join our TG👉https://t.co/56qsCZy8w0 pic.twitter.com/0mSKJz0mCf
— Matrixport (@realMatrixport) January 27, 2023
Matrixport found that 85% of BTC buys responsible for the BTC surge have occurred in the window consistent with United States working hours. Suggest that most Bitcoin buys have occurred at a time when Institutions are active in the USA.
Not so fast, Bitcoin lovers
While the measurement method presented by Matrixport certainly makes sense, it is nowhere near conclusive. Even just looking at the surface. Business hours also happen to be waking hours. So, individual traders could still play a big part in these BTC trades during working hours. To further compound this, cryptocurrency markets operate 24 hours a day and traders in other countries could be contributing to this outside their own business hours. Also, consider that other countries in the same timezone as the US could play a part in the price surges during business hours. El Salvador, which adopted Bitcoin as a legal tender and reserve currency, comes to mind.
Matrixport goes on to explain that the surge only started after the US inflation update, revealing weaker inflation than expected. Matrixport took this to suggest a mid-month rally in BTC as institutional investors used Bitcoin to gain exposure to the asset class and then move into other crypto assets. In that regard, their prediction was accurate as BTC jumped from 18847.70 on January 12th to park at around the US$20000 mark between the 14th and 18th before surging further past the US$22000 mark. BTC peaked at US$23783.90 on the 29th of January, 2023.
Increased correlation between Bitcoin, traditional markets
The increased correlation between Bitcoin, other major cryptocurrencies and the most popular equity markets has been growing. While the correlation is nowhere near perfect, there is enough to suggest that cryptocurrencies are being assimilated into the traditional finance world. The method of measurement that Matrixport uses to arrive at its conclusion isn’t perfect. It does add to the evidence that institutional buyers from the traditional finance world play a more significant part in crypto markets.
Bitcoin has also shown an increased correlation with gold. Gold is a haven asset class. Investors purchase these assets defensively in times of turmoil. Gold has a track record of stability. Haven assets fall out of favour when equity markets rally. Market participants are using Bitcoin as a kind of digital gold. Bitcoin, of course, has higher volatility than other traditional haven assets.
FTX sours the Bitcoin broth
Analysts believe that the FTX fallout has actually hampered Bitcoin’s surge. The cryptocurrency could have performed much better without the FTX scandal. The USA clarified that an action statement on cryptocurrency would be released soon on the sidelines of the World Economic Forum. The space is in dire need of comprehensive regulation. This regulation will be required sooner rather than later if Matrixport’s assumptions are to be believed.
Improved Bitcoin adoption by institutional players will undoubtedly boost the hopes of Bitcoin enthusiasts. Every rose, however, has its thorns. After the fallout of FTX and the pace at which crypto is growing, a regulation gap is also growing. Institutional buys have given Bitcoin a massive 40% surge barely a month into the year. With this attention will surely come regulations which may not smell as sweet, particularly to USA institutions.