A previous couple of weeks have been unkind to the crypto markets. Most action was seriously range-bound and there were few chances for any profit to be created. Instead, the markets moved sideways and that applied to both massive cryptocurrencies like bitcoin and ethereum, but also to the arrangement of alternative coins as well. However, at the start of the new week, the markets finally turned towards a more defined trajectory, which quickly began to point down. How many analysts worry that the coming days and weeks will see a new level of instability and market price decline. There is a strong narrative that the trading volume on all major exchanges remains relatively low. That alone is making some consider the possibility that the previous – or ongoing – crypto winter is not truly over.
But, there is a big silver lining in that very gray cloud. It is related to the fact that big companies and corporations have shown an increased level of interest in crypto acquisitions. While it is impossible to say that the level of institutional interest is on par with the levels from early 2021, it is still more than noticeable. The same is true for both market data coming from cryptocurrency exchanges but also from insider information working or collaborating with these companies and organizations. That could be a game-changer in the coming period and the element that will save the markets from a stronger and more damaging decline.
In a recent couple of weeks, there has been a lot of decreasing crypto trading action. This resulted in a lot of sideways trading movement as well and the incoming data showed that the market capitalization began to dwindle and fall. The same finally occurred and the prices went down as expected. This pushed the price of a BTC token below 40,000 USD, while other cryptocurrencies did not fare any better. Immediately after, the prices stabilized and the selloff did not take on catastrophic proportions. For many, this was a clear indicator that the market is not in a stable or price-sustainable environment.
But, at the same time, there has been a lot of evidence pointing towards a different scenario. This data shows that the additional address is going up and that companies are buying cryptocurrencies more and more despite the present soft market day. While esports players and other casual investors might be turned off by the market instability, institutional investors see the present period as a good position to actually join the same market.
Coinbase Pro Data
Coinbase Pro presents a professional trading platform for digital currencies. It is an offshoot of the famous United States crypto exchange platform Coinbase. However, Coinbase Pro is focused on business and institutional clients. In the recent period, the same platform has increased the level of BTC token withdrawals. That means that a lot of companies are not only buying bitcoin tokens but also that they are moving away from the exchange wallet and onto their dedicated cold storage. This Is always a sign that a business or any other institution is preparing to keep those tokens away from the exchange and hold them for a long period of time.
In fact, the data shows that over 30,000 BTC tokens left Coinbase Pro in a single week. On-chain data also indicates that this behavior began all the way back in March. Other digital exchanges reported a similar pattern of behavior. All of them point to an institutional drive to acquire more and more bitcoin tokens, which are then relatively quickly moved into their cold storage coffers.
Stock Market Correlation
The institutional investment stands in sharp contrast to the overall behavior of crypto markets, especially when it comes to its strong correlation to the stock market. In a recent couple of years, the crypto markets began to mimic the movement of the traditional stock markets, in particular when it comes to tech stocks. Here, the movement of the Nasdaq composite appears nearly identical to that of the bitcoin or ethereum price. Furthermore, the macro factors that impact both spaces also seem eerily similar.
Here, macro factors like the fear for the global economy in the wake of the Russian attack on Ukraine, the energy crisis, and all other elements play an almost mirror-like influence on both tech stocks and cryptocurrencies. Because of that, it would be easy to expect that institutions are steering clear of any major exposition to crypto. That could be true as well, mainly because there is no information point to massive institutional purchases like the one Tesla Motors completed more than a year ago. However, this is not stopping smaller acquisitions to take place either, which are apparently not few or far between in recent weeks.
The underlying factor in all of this has to be, according to many analysts, the simple fact that many companies expect the sluggish market to end and the bear market to turn into a bullish ecosystem. It is impossible to say whether or not that will take the form of a massive rally from the end of 2020 or something more modest. Equally, no one can tell if that kickoff happens soon or many months in the future. Before it, the market could slide further down as well. But, there is no doubt that the moment when the Russia-Ukraine war ends, the markets will rejoice and bounce up.
The same goes for the global economy which will get a much-needed breather moment during the same cessation of hostilities. When that happens, crypto will explode more than the traditional stock market. As cases like that of MicroStrategy already showed, there is a lot of potential in moments like that for any company holding even relatively modest amounts of crypto. Presently, it seems that these lesions of 2020 and 2021 are much more ingrained in the minds of corporate shot callers. That is why the ongoing low-key but persistent institutional buying will continue in the coming weeks.