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Why did institutions wait until ATH to enter the market when $1.2 billion worth of Bitcoin flowed out of Coinbase?

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Why did institutions wait until ATH to enter the market when $1.2 billion worth of Bitcoin flowed out of Coinbase?

On-chain data shows that during Bitcoin's breakthrough of the $30,000 mark, a large amount of Bitcoin flowed out of the Coinbase exchange. Analysts suggest that significant buying from institutional investors is the main driving force behind this rally.

Buyers on Coinbase are the Catalyst for Bitcoin's Surge

In the past 24 hours, Bitcoin has surged over 15%, reaching a market value of $640 billion at the time of writing, just over $2 million shy of Tesla's market value. With such a rapid increase, where is the buying pressure coming from?

Looking back at the surge last night, it was noted that when Bitcoin's price broke $30,000, the trading price on Coinbase exchange had a premium of $350 compared to Binance, indicating that the majority of this surge likely came from the U.S. trading market. Data analytics platform CryptoQuant claimed that Coinbase Pro, a platform with institutions as its core user base, witnessed an outflow of over 35,000 Bitcoins worth over $1.2 billion last night. The CEO of the company, Ki Young Ju, stated that institutions were buying in due to FOMO (Fear Of Missing Out).

Ki Young Ju mentioned that these outflows most likely came from the over-the-counter (OTC) market, where institutional investors typically trade large amounts of Bitcoin. Therefore, interpreting this as a major institutional buying spree seems reasonable. Moreover, significant Bitcoin outflows were observed on-chain transactions even before Bitcoin broke $30,000.

The continuous growth in demand from institutional investors will lead to a tightening supply in the Bitcoin market. For instance, in the first two days of this year, at least 47,000 Bitcoins flowed out of Coinbase Pro's trading market, while the total output from Bitcoin miners during that period was only around 1,700 Bitcoins. This significant discrepancy will result in a continuous reduction of tradable Bitcoins in the market, further driving the price up. According to previous analysis by Glassnode,it shows that only 22% of the total circulating Bitcoin supply is currently available for trading in the market.

Why Buy After ATH?

According to Ashwath Balakrishnan, an analyst at Delphi Digital, when Bitcoin surpasses its all-time high, it becomes more attractive.

"Buying Bitcoin after ATH is actually much better than trying to catch the bottom in a more uncertain environment. If you bought at $20k, you're only up 50% now, but with less friction between you and bottom buyers, hence lower risk. Conversely, going from $4,000 to now is 8x, but they have much more risk and resistance to overcome."

Therefore, many analysts believe that there may be more institutional investors buying Bitcoin in the first quarter of 2021. Investors are advised to monitor the open interest volume in Grayscale's GBTC and CME Bitcoin futures markets for clues.