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Institutional Investors keep Accumulating even as Bitcoin Price heads towards US$40,000 Level and Crypto Market Down by over 10%

The cryptocurrency market is witnessing a significant drop in price, led by the largest crypto coin Bitcoin. BTC price against the US Dollar (BTC/USD) not only slipped below the crucial US$46,000 and US$45,000 support levels but is also heading towards the psychological support at US$40,000 level.

At press time, the price of each Bitcoin is hovering around US$43,575.34 with a fall in price by around -10% in the last 24-hours. Today’s correction has made the Bitcoin price drop by around -27% in the last 7-days and -32% in the last 30-days.

This is the third time in the last 5-days, the BTC price slipped. This increased the probability of a deeper short-term correction for BTC, which many analysts were expecting in the last couple of months. These crypto experts are of the view that the Bitcoin price would witness an explosive bull run after a deeper correction in the short run.

The selloff in Bitcoin led to a market-wide correction for crypto assets. At press time, the price of Bitcoin was down by -12.69%. Leading altcoins such as Ethereum (ETH), Binance Coin (BNB), Cardano (ADA), Dogecoin (DOGE), Polkadot (DOT), Bitcoin Cash (BCH), Litecoin (LTC), and Chainlink (LINK) are down by -13%, -10%, -7%, -7%, -14%, -14%, -10%, and -13% respectively.

Reasons for the Correction in BTC and Altcoin Prices

  1. The cryptocurrency market sentiment soured in recent days after Tesla stopped accepting Bitcoin as a payment method. Tesla’s move came after its CEO Elon Musk raised concerns about the carbon emission issues regarding the energy utilization of Bitcoin mining.
  2. During a heated Twitter conversation between Elon Musk and a Twitter account called Mr. Whale (@CryptoWhale), Musk hinted that his company Tesla may offload all its Bitcoin holdings this quarter.

Mr. Whale said:

“Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their #Bitcoin holdings. With the amount of hate @elonmusk is getting, I wouldn’t blame him…”

To this, Elon Musk replied: “Indeed”.

In another instance, a Twitter account Peter McObnoxious (@PeterMcCormack) said:

“1/ Dear @elonmusk. The perfect troll is one where people don’t know whether it is a troll or not. Your recent poorly informed criticism of #bicoin + support for Doge may be the perfect troll…or you might actually believe this (God I hope not).”

While replying to this Musk said:

“Obnoxious threads like this make me want to go all in on Doge.”

  1. Besides Elon Musk’s rants, another possible reason why all other altcoins are witnessing a significant drop in prices is the possibility of an investigation by the United States Justice Department against Binance, the largest cryptocurrency exchange in the world. This has raised concerns among crypto enthusiasts and investors about a potential regulatory backlash.
  2. Avanti digital bank’s Caitlin Long said that many investors have been spooked by the first-ever reserve disclosure by Tether. On Saturday, Caitlin said that the “probability of default [and] loss severity in default just went up” mainly because of the exposure of its credit. Recent disclosure showed that almost 2/3rd of the cash and cash equivalents of Tether are stored in commercial papers.

Institutions and Corporates are Still Accumulating Bitcoin

As institutional investors are long-term investors, they are not perturbed by the short-term downturns. In fact, these short-term corrections are enhancing opportunities for them to accumulate and increase their return on investment (ROI) in the long run.

Bitcoin Treasuries, which tracks corporate and institutional exposure to Bitcoin, has reported that institutions are keeping up the pace of accumulating their BTCs. In the last 30-days, the institutions have accumulated 215,000 Bitcoins, which is worth around US$10 billion.

In fact, corporates adding bitcoins to their balance sheets such as MicroStrategy, Square, and Riot Blockchain kept accumulating and increasing their exposure to Bitcoin in the last 30-days. Increase in some of their BTC holdings (as of May 12, 2021) are given below:

  • MicroStrategy’s BTC reserve has grown by 2.3 times.
  • Square’s Bitcoin reserve is up 2.1 times.
  • Riot Blockchain’s BTC holdings have increased in value by 9 times.

Institutional investors have fuelled the bitcoin price rise in 2020 and are continuing to make BTC rise in 2021 too. The price of each bitcoin against the US Dollar (BTC/USD) has risen from below US$10,000 level last summer (May-June 2020) to an all-time high of around US$65,000 in April 2021.

The price increased by more than 6-times in less than a year, giving investors an ROI of around 550% in less than a year. Experts believe that institutional investors will keep accumulating Bitcoin at every lower price level, creating the right environment for the BTC market to explode into the next bull run.

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