Grayscale's massive increase in Bitcoin inflows just a week after they reopened their products to new investors is indicative of high institutional demand for BTC.
Institutions are fueling the Bitcoin rally
There are lackluster signals suggesting that there is still a retail demand for Bitcoin and other major cryptocurrencies.
Kimchi Premium in South Korea has not returned to the levels seen in early 2018 and the trading volume of the Japanese cryptocurrency exchange remains stagnant.
Although Binance and Coinbase saw a large increase in volume during December and January, Wang noted that Coinbase's ranking on the App Store fell last week. He wrote:
“Grayscale bought half a billion dollars worth of #BTC today. Meanwhile, Coinbase fell from 20th to 80th on the AppStore over the past week. Make of that what you want ”.
Many other metrics suggest a similar narrative. In 2017 and early 2018, there was a significant increase in the popularity of the Bitcoin keyword on Google Trends.
In recent months, the number of seekers for Bitcoin and other major cryptocurrencies has been relatively low, compared to the peak in 2017.
The main or retail demand for cryptocurrencies has declined further in the last week after BTC began to stagnate.
Altcoins, such as Ethereum and DeFi tokens, have rebounded, but there were no signs of a clear inflow of external capital to the cryptocurrency market.
Therefore, the rally was likely triggered by marginalized capital within the cryptocurrency market or BTC earnings flowing into altcoins from investors looking for high-risk alternatives.
When would the uptrend resume?
On-chain analysts and traders believe that Bitcoin's next bull run will begin when Coinbase exits begin to skyrocket.
Coinbase exits often indicate a high level of demand from high net worth investors in the US market.
Exits are considered a positive indicator of demand because high net worth investors or whales prefer to store their holdings safely in non-custodial or self-hosted portfolios.
As such, when exits from exchanges increase, it shows that investors are holding BTC with a long-term strategy in mind. Ki Young Ju, CEO of CryptoQuant, explained:
“Waiting for a big exit from Coinbase (10k + $ BTC). If it happens, you better buy more Bitcoin. I think it's early ”.
But, until the outflows increase, there is an uncertainty that the price of Bitcoin would rise the way it did in late December and early January. BTC volume is substantially lower compared to the last few weeks, which is also a worrying sign.