Institutions liquidating Bitcoin is being blamed for the horror price plunge. But there’s a silver lining.
Crypto trader Keith Wareing, Bitcoin true believer Jimmy Song and goldbug Peter Schiff have all said that institutions exiting the market played a big role in last week’s 52% price wipeout – the largest fall in Bitcoin’s history in USD terms.
While leveraged traders getting liquidated, cascading stop losses firing, algorithmic trading and the Plus Token scammers selloff all played a role, there is evidence to support the idea the big guys were headed to the exits.
Data from blockchain analysis firm CryptoQuant showed much higher than usual inflows into major exchanges from March 8, after which BTC inflows per block increased by 50-60%.
The implication is that whales and institutional holders were moving coins onto exchanges to liquidate them in the face of the spiraling financial crisis..
On Binance inflows per block spiked 17x at their peak when Bitcoin was trading around $8000. On BitMEX inflows spiked by 19x.
Institutions liquidate Bitcoin to cover losses
After the crash Jimmy Song tweeted: “Today proves that institutions buying Bitcoin has a flip side.”
Goldbug Peter Schiff agreed – as Bitcoin was crashing he tweeted:
“If any institutional money ever actually went into Bitcoin it’s about to come out, never to return. Bitcoin has finally proven conclusively that it’s neither a store of value, a safe haven, nor a non-correlated asset. The Bitcoin chain letter has finally run out of links!”
If any institutional money ever actually went into #Bitcoin it's about to come out, never to return. Bitcoin has finally proven conclusively that it's neither a store of value, a safe haven, nor a non-correlated asset. The Bitcoin chain letter has finally run out of links!
— Peter Schiff (@PeterSchiff) March 11, 2020
It’s worth pointing out that the Gold price has crashed 10% over the same period, it fell by a third during the Global Financial Crisis, and anyone who bought Gold from mid 2011 to the end of 2013 is still underwater with their ‘safe haven’ investment.
The following day, Wareing advanced his theory that a rush to the exits by institutional investors had caused the plunge below $4000.
“Institutional investors that were vested in #bitcoin are getting hammered in traditional markets.They are overextended and are selling off their #btc to cover their margin calls. This will drain the swamp, and end any equity/crypto market correlation,” he tweeted.
Institutional investors that were vested in #bitcoin are getting hammered in traditional markets.
They are overextended and are selling off their #btc to cover their margin calls.
This will drain the swamp, and end any equity/crypto market correlation.
— ????☣️ Keith Wareing ???????? (@officiallykeith) March 12, 2020
Institutions see Bitcoin as just an exotic bet
While there has been great anticipation of institutional money flowing into Bitcoin over the past year, they see it as just another commodity or exotic price bet.
Their exit means that it’s likely that now the true hodlers and Bitcoin proponents are supporting the current price. The much lower price allows newcomers to enter the market at a much cheaper price – and the more widely Bitcoin is distributed the less likely it is that whales cannot crash, or manipulate the price in future.
Wareing wrote in an opinion piece: “The reason this is not only good but, in my opinion, great for Bitcoin is that by having Bitcoin held by a large number of small holders as opposed to a small number of large holders, means that it is less likely for a catastrophic sell-off to occur in the future. This will also enable the digital asset to build on its new support level.”
Glassnodes data on March 14 showed the number of Addresses holding 0.1+ coins just reached an All Time High of 2,897,280.
According to a tweet from Santiment, its data from that day showed “we’ve just witnessed the highest value of tokens exiting exchanges since days after the Bitcoin top hit in January, 2018 (approximately 26 months)” the analytics firm tweeted.
Of course, opinions are like bums – everybody has one and most of them stink.
Galaxy Digital’s Mike Novogratz isn’t convinced the crash was caused by institutional money leaving the space.
“That wasn’t institutions. That was a leveraged washout. Institutions aren’t fast enough to sell like that. That was panic selling from people who bought on margin.”
How did $btc go from being a hedge against bad stuff to getting washed out and trading like a risk asset? When things go from bad, to very very bad like they did last week, investors take leverage down as fast as they can. They book profits to make up for other losses. Ouch.
— Michael Novogratz (@novogratz) March 1, 2020