Analyst Willy Woo said that institutional investors could be the driving force behind the recent rally in the price of bitcoin (BTC).
BTC trading volume increased from $12.9 billion to $31.9 billion, during the first 30 days of January. This coincided with bitcoin rising nearly 40% in that period and taking it to over $23,000 from a low of $16,000.
At the time of writing (11:59 UTC), bitcoin was trading at $23,530, down 1.24% in 24 hours.
According to Woo, the rise in BTC is associated with a new pattern of billions of dollars in stablecoins flowing into exchanges “only during weekdays.”
How do we know that it's an institution. What if someone "wants" it to appear like institution.
— Spivak (@spivakstar) January 31, 2023
The rise in bitcoin prices “looks to me like the heat signature of the large institutions making the purchases. The timing of the inflows spans approximately 16 hours, with the quiet zone being Asian business hours. This suggests they are Western institutions in the U.S. and Europe,” the analyst said.
Woo added that spot market flows have been dominating the rally, rather than derivatives trading.
“It’s spot purchases that are moving the price and derivatives that are lagging behind. [This means] long-term institutional investors are coming in, through spot buying and moving into custody,” he wrote.
Interesting! How do you feel about this take?https://t.co/l2ajhrsCbI
— John Holding (@Joso006) January 31, 2023
The spot market consists of buying and selling financial assets, with the intention of receiving immediate delivery.
The derivatives market, on the other hand, is the set of financial instruments whose main characteristic is that their price varies depending on the value of another underlying or reference asset.
Willy Woo argues that institutional investment comes from existing crypto funds that stayed out in the bear market, using stable currencies.
“Remember, if it’s a fund, [it] will bank with Silvergate or Signature Bank. Silvergate had a bank run and Signature reduced crypto exposure. So stablecoins have been the best place to hold USD in recent months.”
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