The ongoing Bitcoin (BTCThe rally was primarily institution-driven, analysts say, with metrics such as CME’s open interest and Grayscale’s assets under management (AUM) backing this story.
At the same time, the gold market has seen a large outflow in recent weeks. On November 24, independent financial researcher Jan Nieuwenhuijs reported that gold saw the largest weekly outflow in history.
The largest outflow of gold ever. pic.twitter.com/Re4o3PHrel
– Jan Nieuwenhuijs (@JanGold_) November 23, 2020
The timing of the increased outflows from the gold market is remarkable as it comes after the entry of major institutional investors into the Bitcoin market.
CoinTelegraph reported that Guggenheim Partners, which manages $ 275 billion in assets, is the latest institution to show interest in Bitcoin.
What does this mean for Bitcoin?
In the medium to long term, the inflow of institutional capital into Bitcoin could lead to two major trends.
First, Bitcoin could see a more sustained upward trend that has emerged since September. Institutions, especially those exposed to BTC through the Grayscale Bitcoin Trust, are likely to build BTC with a long-term strategy.
Some long-time Bitcoin investors, who held gold positions for extended periods of time, have also started allocating their capital entirely in BTC. Raoul Pal, the CEO of Real Vision Group, said:
“Okay, last bomb – I have a sell order tomorrow to sell all my gold and scale in to buy BTC and ETH (80/20). I don’t own anything else (except some bond calls and some $ ‘s). 98% of my liquid net worth. See, you can’t categorize me except #irresponsiblylong Good night all. “
Second, fund managers say that this could make Bitcoin even more dominant in the cryptocurrency market. Currently, Bitcoin’s market cap represents 63.83% of the global cryptocurrency market valuation.
Kyle Davies, the co-founder of Three Arrows Capital, one of the largest funds in the cryptocurrency sector, said:
“No one is going gold -> $ BTC -> alts This year there has been a large influx of high net worth of USD or gold into BTC. This is not retail. These guys don’t go in waves. “
The short term trend of BTC remains uncertain
Bitcoin has seen strong momentum in the past three months and has seen hardly any major corrections.
During past bull cycles, it is not uncommon for BTC to see a 30% decline, and the recent run has yet to take a major downturn. But in the short term, on-chain analysts say BTC could brace for a deeper drop.
“The fact that whales are not withdrawing means that $ BTC is available for sale. If whales think the price will go up, they will take a lot of $ BTC. I don’t know when it will start, but if the price goes down whales will react to the price and cause high volatility. “
Whether the demand from institution buyers and their time-weighted average price (TWAP) algorithms would counter whale selling pressure would likely dictate BTC’s short-term price cycle.