BITCOIN INVESTORS

Crypto Market Intel: Big Bitcoin wallet holders increased their holdings in 2020

Digital wallets holding 5 to 100 bitcoins & 1000+ bitcoins increased by 8,842 this year

Crypto prices declined this week, led by Bitcoin. A rare price correction for digital assets in recent weeks is a healthy sign if any. There is no change in fundamentals, and this move seems more like the crypto market trying to find a balance between demand and supply, after the rapid rise in prices. As of Friday 12/12, Bitcoin has hit a fresh low of $17, 553, but has rebounded to $18,146 at the time of writing. Similarly, Ethereum and Ripple have seen bigger declines than BTC.

Bitcoin and Ethereum inflows to exchanges and trade intensity were below the 30-day average previous week, although for XRP the reverse was true. After a weekend of low BTC exchange flows last weekend, it increased through the week as the price declined. After reaching an all-time high, the investors are probably in a wait & see mode putting downward pressure on prices. Some retail traders are taking this as a signal to sell, which is weighing down on the price even further.

Although the crypto market was in a corrective cycle this week, institutional support continued to pour in. A couple of noteworthy announcements hit the wires this week. The first one was the debut of the World’s first Ethereum ETF on Canada’s Toronto Stock Exchange (TSX). The digital investment product was launched by 3iQ — Canada’s largest digital asset investment fund manager with more than C$500 million in assets under management.

It is the same company that earlier pioneered Canada’s first public Bitcoin ETF, the Bitcoin Fund, in April 2020 after years of working with regulators to approve the fund. The 3iQ Ether Fund was listed on TSX after raising more than $75 million in contributions from Canadian investors. The fund is managed by 3iQ and will hold nearly 134,000 ETH managed by Gemini Custody services.

In other news, 169-Year-Old MassMutual invested $100 Million in Bitcoin for its general investment fund. This is in addition to MicroStrategy Inc., and Square Inc., which have recently expanded their investments in the world’s premier digital currency. Talking about the growing institutional support, today’s charts (above) make more sense too.

Looking at the left chart above, it is clear that as the BTC reached an all-time high (ATH), bitcoin inflows to exchanges increased causing a drop in prices as investors booked their profits. Although the trade volume declined subsequently, the inflows remain elevated putting further downward pressure on prices. As the trade volume continued to drop, bitcoin was unable to sustain the ATH.

Although the price looks poised for some short-term correction, prices are still at historically high levels. While we might still see some consolidation below the ATH, but as long as the long-term fundamentals stay strong we are bound to see continued investment in Bitcoin, especially by institutional investors. And the latest research by Chainlysis Market Intel sheds some light on this.

According to the research, in 2020, 2.4 million bitcoin moved into wallets holding 5 or more bitcoin, and the number of such wallets has increased by 8,842. As per the right chart above, the biggest increase in the number of wealthy wallets comes mainly from those holding 5 to 100 bitcoin or 1,000+ bitcoin. On the flip side, the number of wallets holding 100 to 1,000 bitcoin experienced a small decline, of around 1%.

Overall, smaller and larger investors saw an increase, while the number of medium-size investors has been flat. Even taking into account the fact that these wallets may contain bitcoin owned by a number of investors, the increase of 302 wallets holding 1,000+ bitcoin, ~$20 million+, is striking as it accounts for a 17% increase in the number of such wallets since the start of the year.

It will be interesting to see whether these BTC investors would continue to hold the premier digital asset if the prices continued to fall. During the start of the pandemic in Mid-March, when the crypto prices fell dramatically, many investors who had held bitcoin for less than a year exited. Although the pandemic is a one-off event, it goes to show that new buyers do not necessarily hold through all price cycles.

For now, though, I remain bullish on Bitcoin.

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