Bitcoin Phase One Crypto asset management firm CoinShares said the recent withdrawals have not caused panic among institutional investors.
Professional allocators reduced exposure slightly but largely maintained their positions compared with last year. The cryptocurrency investment manager said in a report on Tuesday that advisors reduced their positions while hedge funds trimmed their holdings as broader leverage easing and other market opportunities moved on.
Long-term investors continue to add to their holdings. “Endowments, pensions and sovereign wealth continue to quietly grow,” analyst Matt Kimmel wrote.
Bitcoin has struggled to regain momentum since hitting an all-time high near $125,000 in early October. At press time, the world’s largest cryptocurrency was trading at approximately $72,370.
Cryptocurrency markets have been weak in recent months as a combination of macro and market-specific pressures weighed on prices. Rising interest rates and a stronger dollar have dampened appetite for risk assets, while leveraged positions built up earlier in the rally have been unwound. Meanwhile, profit-taking by long-term Bitcoin holders and uneven capital flows into spot exchange-traded funds (ETFs) have limited momentum, making it difficult for the sector to resume a sustained upward trend.
Kimmell said that although Bitcoin has fallen by about 23% during this period, global Bitcoin ETF flows have remained positive, indicating that the sell-off in the fourth quarter was driven more by long-term holders taking profits rather than new institutional funds exiting the market.
Historically, cryptocurrency bear markets have reallocated supply from short-term traders to long-term holders. The emergence of ETFs now offers a new way to see whether institutional capital is following the same pattern, Kimmell said.
So far, the data points in that direction. The roughly 25% quarterly drawdown did not trigger widespread institutional capitulation, and most of the decline in assets under management reflected price movements rather than significant investor outflows, the report said.
Still, CoinShares cautions that the sample size is still small. The company said the real test may come in upcoming regulatory filings that will capture institutional behavior during periods of wild swings, including Bitcoin’s slide toward $60,000 and a single-day drop of 17%.
Bitcoin and the broader cryptocurrency market are trading higher this week, rebounding after weeks of volatile trading. The rally was driven in part by a return to risk appetite across the market and steady demand for Bitcoin ETFs, helping the largest cryptocurrency regain momentum and fueling gains for major altcoins. Traders also pointed to short covering and positioning resets following the recent sell-off as factors behind the move.
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