Institutions get busy as BTC battles $40k

Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.

Monday saw the culmination of weeks of selling pressure near high-timeframe (HTF) resistance, with BTC losing its $42k footing to briefly dip to $39k. The leading digital asset has since mounted a muted recovery, which, for now, sees it balancing on increasingly tenuous $40k support. Similarly, Ethereum now sits uneasily at $3k support, having also retraced significantly from local $3.5k highs. Despite taking a knock in recent days, ETH’s performance in relation to BTC continues to maintain a steady uptrend, as excitement surrounding ETH 2.0 grows and the chain’s native DeFi and NFT sectors continue to expand at breakneck pace.

BTC:USD (left), ETH:BTC (right)

Hey, big spender

Despite the uncertainty that characterised the past week, institutional-sized outfits have broken out the cheque book in recent days. On Monday, Elon Musk took another step to becoming the world champion of influencers with the purchase of a 9% stake in Twitter ($TWTR). Musk’s curious obsession with the social media heavyweight’s policies on free speech has evidently emboldened the world’s wealthiest man to take matters into his own hands, to the point that he has offered to purchase 100% ownership of the company with a cash offer of $43B - a substantial premium on TWTR shares trading on the open market. Excitement surrounding Musk’s latest fascination spilled over to crypto, with the SpaceX chief’s beloved DOGE rallying on the back of his initial TWTR purchase.

Elsewhere, USDC issuer Circle announced a mammoth $400m funding round on Tuesday, featuring the likes of BlackRock, a firm boasting $10T in assets under management (AUM). USDC is currently the fifth largest cryptocurrency by market cap, and the second largest stablecoin in circulation behind USDT (Tether). At present, there is $50B USDC in circulation, which shows no sign of abating as the asset becomes the go-to stablecoin for transacting in much of the Western world. The funding round will aid Circle’s further expansion, including its ambitions to become a federally-chartered, national commercial bank as announced in August last year.

Not to be outdone, Terra’s Do Kwon has continued to amass BTC during the recent downturn, with the Luna Foundation Guard’s wallet now totalling 42k BTC - more than $1.7B at present. With plans to eventually purchase $10B in BTC, it’s safe to assume that Kwon’s purchases will not be ending anytime soon.

Forward focus

So, what’s the deal? A flurry of fresh institutional excitement, while positive for the space as a whole, has failed to make a significant impact on the market’s broader bearish momentum. In the face of a prolonged global conflict, widespread macro instability, and latest US CPI figures of 8.5%, it’s a significant challenge to discern catalysts that could see us regain an UpOnly narrative in the short-term. 

An oft-used adage comes to mind at times like these - “timing the market is less important than time in the market”. It’s no secret that the global financial system operates on boom/bust cycles, evidenced by 2008’s global financial crisis and 2020’s COVID crash. In much the same vein, speculative markets, and crypto specifically, are governed by cycles of dramatic markups culminating in rapid, cross-sector drawdowns. While the Musks and Kwons among us boast enough liquidity to stay solvent for several lifetimes, the same cannot be said for regular investors. It’s vital to choose trades carefully in order to prioritise the protection of capital when markets fail to indicate strong directionality. As a visceral example, Korean trader Satto fell asleep while livestreaming a short from $46k on Monday, only to wake up deep in the red, eventually being liquidated for $10m in a matter of hours. Let Satto’s loss be a lesson to all of us - yield on a high-risk trade, for the most part, is not worth the risk of running insolvent in a market that’s poised to continue its explosive growth in coming decades.

F in the chat for a fallen degen