What are institutions and whales doing as Bitcoin drops to $30,000 mark?

As the cryptocurrency market continues to lose ground, with its total market capitalization falling to $1.4 trillion, while Bitcoin 's price hits the $30,000 mark, blockchain analysts from CoinShares and Glassnode have uncovered discrepancies in investor activity. Interesting combination.

There is evidence that investors are taking advantage of last week's price turmoil to move more assets into exchange-traded products based on bitcoin, ethereum and other cryptocurrencies. But it's worth noting that, unlike retail investors, wealthy investors (known as whales) and institutions with large positions often have enough money on the bottom to weather the storms in the market.

According to a new report from CoinShares, over the past week’s events, net inflows into cryptocurrency investment products totaled $40 million, with net inflows of $45 million in bitcoin, suggesting that investors are taking advantage of the market to trade at a lower rate. price into exchange-traded bitcoin products.

The CoinShares report tracks exchange-traded cryptocurrency products such as the Grayscale Bitcoin Trust (G BTC ), which passively invests in Bitcoin (BTC) and mirrors its price movements. Shares of GBTC were down 19% over the past five days on Monday afternoon, compared with Bitcoin’s 23% drop.

James Butterfill, director of research at CoinShares, wrote in the report:

Interestingly, we haven't seen a surge in trading activity in investment products like we've historically seen during periods of extreme price weakness, and it's too early to tell if this marks the end of the four-week period of negative sentiment.

One possible reason, while price weakness has seen Bitcoin and Ethereum drop 50% from their all-time price highs in November, it still hasn’t been as bad as previous bear markets.

Glassnode wrote:

Compared to the final lows of previous Bitcoin bear markets, the current price is still modest; July 2021 saw Bitcoin’s price drop by 54.2%, while the bear markets in 2015, 2018 and March 2020 were It lost 77.2% and 85.5% after the record high.

Meanwhile, there has been some noteworthy action in terms of price speculation. Investors use futures (a type of derivative) to bet on whether the price of an asset will rise or fall. Over the past week, a record $4 million has flowed into contracts shorting Bitcoin (a bet that the price of Bitcoin will continue to fall).

This brings the total assets shorted in Bitcoin products to an all-time high of $45 million. Despite the record, long Bitcoin assets that are bullish on rising prices still far outnumber short Bitcoin products. According to CoinShares, the $45 million short product is 0.15% of the $30 billion bitcoin long product's assets under management.

But the level of optimism about the market may soon fade.

In a newsletter on Monday, Glassnode calculated that if the price of bitcoin fell to around $33,600 per coin, then cryptocurrency investors would face the same pressures seen in previous bear markets. A few hours after Glassnode's report on Monday morning, bitcoin's price did drop, dropping as low as $30,516.07 before recovering slightly.

CoinShares looks at exchange-traded funds that offer indirect exposure to cryptocurrencies, while Glassnode analyzes blockchain data for wallets with direct exposure to the cryptocurrency market.

According to their calculations, over 60% of the network currently has unrealized losses.

Glassnode researchers noted:

These levels are consistent with the profitability seen in late 2018, and in the bear market at the end of 2019-2020. However, it should be noted that both of these examples occurred prior to the market's final capitulation event (the Great Crash).