Bitcoin is in the middle of a renaissance of sorts. Long-time holders, aka whales, have started to sell down significant shares of their holdings, indicating a changing of the guard within the digital asset ecosystem. At the same time, institutional investors like ETFs and corporations are making Bitcoin allocations at a historical pace and transforming the market landscape.
Despite a market environment influenced by President Donald Trump's pro-crypto stance, Bitcoin's price remains relatively stable around levels seen at the start of the year. This calmness betrays the reality that this is the moment where the market undergoes a quiet transfer of control from early adopters to institutional actors.
The Great Whale Sell-Off
Bitcoin whales—the individuals and companies that previously held 90 percent of the cryptocurrency—are now selling their holdings. These big holders still hold 500,000 coins that they are still in the process of selling.
In 2020, research from Flipside Crypto indicated that approximately 2% of anonymous ownership accounts on Bitcoin's blockchain controlled 95% of the digital asset. All this ongoing sell-off indicates is a re-distribution of wealth within the Bitcoin ecosystem.
"What we're seeing is a churning in the base." - Edward Chin, co-founder of Parataxis Capital.
Institutional Accumulation
While whales are selling, institutional investors like Grayscale are wildly accumulating Bitcoin. Treasury companies and different treasury-related ETFS have collectively absorbed nearly 900,000 treasury coins in the previous 12 months.
Michael Saylor and his company—rebranded as Strategy—just pulled off a masterstroke. They’ve done a great job of accumulating $65 billion in Bitcoin over the past five years! These institutional players now account for almost 4.8m of the coins in circulation (~20m).
"The goal for a long time has always been to make Bitcoin a palatable asset for institutional investors to provide exit liquidity in volume so the whales could cash out." - Hilary Allen, a law professor at American University's Washington College of Law.
Volatility Dries Up
The BTC Volatility Index from Deribit, the leading indicator for Bitcoin price fluctuations, has tanked. It has since dropped to the lowest level it’s been in almost two years. According to a new report from crypto firm Arcane Research, it means volatility is going extinct in the Bitcoin market.
In the past, even small outflows from the whales have caused massive drops. In 2018, only a 2% outflow led to a 74% drop in Bitcoin’s price. Likewise, a 9% outflow last year led to an incredible 64% drop in worth.
"This can go on for a long time - years." - Markus Thielen, CEO of 10x Research
Bitcoin has an impressive market cap of $2.1 trillion. It is struggling to get above its all-time high near $110,000.
