Bitcoin Is Tanking—Here's What Institutions and Whales Are Doing

As cryptocurrencies continue to lose ground, with the total market cap falling to $1.4 trillion and Bitcoin’s price dropping to $30,000, blockchain analysts at CoinShares and Glassnode have spotted an interesting mix of investor activity.

There’s evidence that investors were using price turbulence last week to move more assets into Bitcoin, Ethereum, and exchange-traded products that are based on other cryptocurrencies. It's worth noting, though, that unlike retail investors, wealthy investors with large holdings (known as whales) and institutions tend to have enough financial padding to weather a storm in the market.

Over the past week, crypto investment products saw net inflows totaling $40 million and Bitcoin saw net inflows of $45 million, according to a new CoinShares report, a sign that investors are taking advantage of the market to get into exchange-traded Bitcoin products at reduced rates.

The CoinShares report tracks exchange-traded crypto products, like the Grayscale Bitcoin Trust (GBTC), which is passively invested in Bitcoin (BTC) and mirrors its price movement. Case in point: On Monday afternoon, GBTC shares were down 19% over the past 5 days compared to BTC’s 23% drop.

“Interestingly, we have not seen the same spike in investment product trading activity as we typically see historically during extreme price weakness periods,” James Butterfill, head of research at CoinShares, wrote in the report, “and it is too early to tell if this marks the end of the 4-week run of negative sentiment."

One possible reason: While price weakness has resulted in Bitcoin and Ethereum falling 50% below the all-time highs they saw in November, it’s still not as bad as previous bear markets.

“It remains modest when compared to the ultimate lows of prior Bitcoin bear markets,” Glassnode writes. “July 2021 reached a drawdown of -54.2%, and the bear markets of 2015, 2018 and March 2020 capitulated at lows between -77.2% and -85.5% off the ATH.”

Meanwhile, there’s been some notable action in price speculation. Investors use futures, a type of derivative, to bet on whether an asset will increase or decrease in price. A record amount of money, $4 million, flowed into short Bitcoin contracts (a bet that the price will continue to fall) over the past week. 

That’s brought the total assets in short Bitcoin products to an all-time high of $45 million. Despite the record, assets sitting in long Bitcoin, optimistic the price will improve, still far outweigh short Bitcoin products. The $45 million in short products is 0.15% of the $30 billion assets under management in long Bitcoin products, according to CoinShares.

But the level of optimism could soon wane.

In its newsletter on Monday, Glassnode calculated that if prices fell to around $33,600 per BTC before crypto investors were under the same pressures as seen in previous bear markets. Hours after Glassnode released the report on Monday morning, the price did just that, falling as low as $30,516.07 before rebounding slightly.

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

By their calculations, more than 60% of the network currently have unrealized losses.

“These levels are coincident with profitability seen in the late-2018, and late 2019-20 bear markets,” Glassnode researchers noted. “However, it should be noted that both instances were prior to the final capitulation flush out event.”