Shrimp vs. Whale! Latest Research Shows: Retail Investors Buy on Dips After Institutions Exit Bitcoin Market

On March 12th, amidst the turmoil in the global economy, the financial markets experienced a significant downturn, leading investors to withdraw their funds. The sell-off in Bitcoin was even more severe, with many investors who purchased Bitcoin after 2017 choosing to either hold onto their gains or cut their losses. However, according to the latest research report, it appears that the interest in Bitcoin among retail investors outside of exchanges has increased as the price declines.

Retail Address Numbers Continue to Increase

According to the latest network status report from blockchain analytics company Coin Metrics:

"Since the price collapse on March 12, the number of addresses holding relatively small amounts of BTC has been increasing."

Research shows that the number of addresses holding between "one billionth" and "one hundred millionth" of the total BTC supply has increased by about 6% in the past 90 days. At the same time, the number of addresses holding between "one hundred millionth" and "one ten millionth" of the total supply has increased by approximately 4%.

Fear in Others, Greed in Me

The increase in the number of addresses began when Bitcoin plummeted to a yearly low of $3,800. Research indicates that the increase in small-scale purchases and the rise in new address numbers may suggest that more and more new retail investors are entering the market to buy and hold Bitcoin. There is a lot of data confirming the growing adoption of Bitcoin globally in times of crisis. For instance, after the drop, cryptocurrency asset management company Bitwise released trading volume data from major exchanges the day after, showing $5 billion in new funds flowing into Bitcoin.

Astounding #bitcoin volume on these down-moves.

Post-2017 infrastructure is proving to be mostly robust under stress. Markets clear! pic.twitter.com/AnZyAnKGDv

— Bitcoin is Saving (@BitcoinIsSaving) March 13, 2020

Nic Carter, co-founder of Coin Metrics, stated in an interview that the sentiments of these retail investors are contrary to some institutional investors who entered Bitcoin after 2017. While retail investors are buying on dips, institutions that were originally in the market are rushing to liquidate. Nic Carter pointed out that the recent market condition can be summarized as:

"Retail investors buy on dips, while institutional investors are faced with the choice of adding margin or exiting the market."

Institutional Investors Exiting the Market

Since the incident, Bitcoin's overall liquidity has shown a structural decline, with institutional-grade Bitcoin investment funds Adaptive Capital and Cryptolab Capital both declaring bankruptcy after the crisis. During the liquidation period from March 12 to 13, BitMEX liquidated over $1 billion in margin, leading to a massive capital outflow from the exchange (approximately 75,000 BTC). A previous article suggested that one of the reasons for the Bitcoin crash may have come from BitMEX, and these two investment institutions happened to both be trading on BitMEX.

Therefore, under deleveraging and liquidity risk, institutional investors in the cryptocurrency market, like traders in other markets, are converting investment assets into fiat currency or stablecoins for hedging. Since the drop, stablecoin circulation has grown comprehensively, increasing by over $2 billion.

Related Reading

• Coinbase Analysis of 3/12: Despite the chain reaction of traditional financial market crashes, Bitcoin remains a "hard asset"
• [Full Translation of BitMEX Commentary] Inflation is Coming, the Biggest Opportunity in Bitcoin's Brief History

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