Bitcoin Whales and Large-Scale Institutions “All-In” on Bitcoin During COVID-19, Retail Investors Are More Cautious

Coronavirus has led to many investors turning towards Bitcoin as a hedge, but research from OKEx revealed that the way in which individual and institutional investors leveraged the digital asset differed.

Big-Time Players Capitalize on BTC

With coronavirus impacting economies worldwide and the US dollar plummeting, data by Malta-based crypto exchange OKEx suggested that many investors have been turning towards Bitcoin to secure their financial assets. Even institutional investors have converted to Bitcoin as a hedge option, starting with seasoned billionaire investor Paul Tudor Jones.

The renowned hedge fund manager bought Bitcoin (BTC) back in May, as central banks across the globe were mass printing fiat money to deliver stimulus packages for the massive coronavirus blow impacting global economies. According to a Bloomberg report, Jones compared Bitcoin to gold, saying it reminded him of the major role played by the traditionally viewed safe-haven asset back in the 1970s. He said:

“The best profit-maximizing strategy is to own the fastest horse. If I am forced to forecast, my bet is it will be Bitcoin.”

The news was followed by Microstrategy’s announcement that the billion-dollar business intelligence and software company had acquired 21,454 Bitcoins, which was the equivalent of over $250 million at the time. The report from OKEx read:

“With stories like these hitting the headlines, it is easy to agree with the general narrative that BTC is increasingly becoming more attractive to institutional investors and big players.”

Individual investors like BTC, but more cautious

OKEx’s survey, which looked at data from the beginning of the COVID-19 pandemic  – January –  till August 2020, also suggested that the largest amounts of BTC transactions were small-scaled, figuring between 0 to 1 BTC. They were often the preferred transaction amount of “retail” investors, which were small-time players with nowhere close to the capital possessed by institutions.

These investors took a “wait-and-see” approach, especially after Bitcoin price hit $10,000 in May. They were more cautious with BTC, especially as cryptocurrency could at times demonstrate high volatility and dramatic price changes. The report read:

“Retail investors buy and sell relatively small amounts of BTC as the cryptocurrency's price fluctuates and they may be more easily ‘shaken out’ of the market in times of high volatility and dramatic price declines.”

Bitcoin transactions of over 1,000 BTC surging

Bitcoin transactions gained traction again in late June, and the trend has been going up ever since. Transactions of over 1,000 BTC have become increasingly popular after Bitcoin hit the $10,000 price mark.

While small-scale investments are the most common Bitcoin market transactions, OKEx in collaboration with Catallact demonstrated this in their report:

“The number of transactions decreases as the amount of BTC being transacted increases.”

Why have institutions adopted BTC during COVID-19?

Bigger BTC investments, namely anywhere between 5,000 and 10,000 BTC, appear to majorly originate from institutional investors. An uptrend of these large-scale transactions has been observed since June, and “throughout the summer of Bitcoin’s price consolidation.” Referring to this “interesting anomaly,” OKEx proposed two explanations.

The first explanation was that crypto exchanges have been shifting digital coins in various wallets for reasons, such as cybersecurity. Another explanation would be that large-scale institutional investors entering the crypto market have decided to accumulate Bitcoin in bulk, in anticipation of market prices increasing or decreasing. In addition, due to COVID-19’s impact globally, many investors have turned to Bitcoin as a hedge against economic inflation.

This in turn has led to many speculating about whether Bitcoin will potentially replace gold as a traditional safe-haven asset.

Winklevoss Backs Bitcoin

Bitcoin bulls such as Gemini co-founders Tyler and Cameron Winklevoss seem to think so. Responding to a poll originating from a former regulatory counsel executive for Coinbase, which asked when investors “realized the full potential of bitcoin and how it can change everything,” Tyler Winklevoss commented:

“When I realized that it was the first money in the world that was built purposely for the internet and therefore works just like your email.”

The Bitcoin billionaire had recently made a case about Bitcoin heading towards a markup of $500,000. 

At the time of writing, Bitcoin is trading at around $10,370. The "digital gold" asset had experienced a price crash at the beginning of the month, dropping below the $11K mark and breaking two support levels.

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