Bitcoin Still Somewhat Retail-Driven
Over the past few months, there has been a whole lot of talk about Bitcoin becoming the next trend for institutions. Like mom & pop investors fueled 2017’s monumental run, investors today expect institutional money, the “smart money”, to drive cryptocurrencies upward. Thus, a narrative has formed. “The herd is here“, some that abide by this narrative may say.
According to Changpeng “CZ” Zhao, the beloved founder of Binance, this is not the case though. Speaking to Bloomberg for a recent interview, the Chinese-Canadian businessman suggested that Bitcoin’s move to $10,000 and beyond wasn’t mainly catalyzed by your average institutional player.
Instead, Zhao notes that it’s been a combination of retail and institutional investment. Backing this quip, the exchange chief executive cited data from Binance, claiming that 60% of all trading volume on the platform is from retail players — about the same percentage as it was last year.
CZ’s comment comes in stark contrast to comments from other reports. As reported by Bloomberg, a JP Morgan analyst stated that the paper futures contracts from the CME and CBOE (now defunct), and thus institutions, have played a larger role in recent Bitcoin price action that what many consumers are fed and believe:
“The importance of the listed futures market has been significantly understated. The report by Bitwise credits the traded futures as an important development in allowing short exposures that enabled arbitrageurs in properly engaging in arbitrage, and that the futures share of spot Bitcoin volumes increased sharply in April/May. [The data suggests] that market structure has likely changed considerably since the previous spike in Bitcoin prices in end-2017 with a greater influence from institutional investors.”
Also Diar recently wrote that “firm size” addresses (1,000 to 10,000 BTC under management) now own 26% of the circulating supply of the cryptocurrency, up from under 20% in August 2018.
This signifies accumulation of almost — if not more than — 1,000,000 coins, implying inflows of hundreds of millions and billions of dollars. It is unclear who is behind these transactions, but as explained by Diar, the size of the wallets suggest big investors.
Well On Their Way
Whether or not institutions are occupying the cryptocurrency market now, one thing is for certain: soon, there will undoubtedly be institutions in this space. Bakkt, the New York Stock Exchange’s sortie into the cryptocurrency space, is soon expected to beta test a Bitcoin futures product that is slated for institutional players. Also, Fidelity Investments, a firm with over 10,000 institutional clients, is still reported to be testing its cryptocurrency custody and trade execution services.
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