The founder of Capriole Investments highlighted how institutions have recently reversed course on Bitcoin, starting to sell again.
Bitcoin has recently seen institutional demand turn red
In a new article on X, Capriole Investments founder Charles Edwards discussed the latest trend in institutional demand for Bitcoin. The indicator cited by Edwards is “Net Institutional Buying”, which measures the net trend of institutions in the BTC market.
As an indicator for institutions, the metric uses data from spot exchange-traded fund (ETF) and digital asset treasury (DAT) companies. Spot ETFs are investment vehicles that allow investors to gain indirect exposure to Bitcoin. These funds hold and hold BTC on behalf of their investors. Likewise, DAT companies also provide their traders with exposure to the price of cryptocurrency by holding BTC on their balance sheets.
As both of these represent a regulated off-chain route to digital assets, they tend to be the preferred mode of investment for more traditional traders like institutions.
Now here is the chart shared by the analyst that shows the trend of net institutional purchases of Bitcoin over the past two years:
Looks like the value of the metric seems to have turned negative in recent days | Source: @caprioleio on X
As the chart above shows, net institutional purchases of Bitcoin reached a positive level in March and remained there until very recently, indicating that demand from massive entities was flocking to the cryptocurrency.
The trend has changed, however, and the measure is now back in negative territory. “The institutions are throwing themselves at us once again,” Edwards noted. The decline in the indicator is primarily driven by U.S. cash ETFs, which have seen a shift toward net outflows since the May 12 Consumer Price Index (CPI) report.
The report shows that the CPI reached 3.8% in April, which is the highest level seen in the United States since May 2023. The high inflation rate could be the reason why large financial entities have withdrawn from risky assets like Bitcoin.
It now remains to be seen how long institutional net purchases will remain negative. “It’s difficult to get significant price improvement when this measure is in the red,” the analyst explained.
Furthermore, there are currently 7.75 million tokens held at a net unrealized loss on the Bitcoin network, as highlighted by on-chain analytics firm Glassnode in an article
The trend in the 7-day SMA of the BTC Total Supply in Loss over the past decade | Source: Glassnode on X
This level is below the highs seen after the February crash, but still significantly elevated compared to last year’s figures. “This oversupply is a structural feature of bear markets, usually resolved only when weaker hands capitulate,” Glassnode said.
BTC Price
Bitcoin has been broadly moving sideways over the past few days, with its price still floating around $77,300.
The price of the coin seems to have bounced back from its weekend dip | Source: BTCUSDT on TradingView
Featured image of Dall-E, chart from TradingView.com
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