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Institutional investors’ influence on Bitcoin’s (BTC) rise to $1T market cap might be overemphasized

Bitcoin market cap's rise to $1 trillion might have been triggered by retail investors and whales.

Image by Gerd Altmann from Pixabay

Sat, 27 Feb 2021, 14:40 pm UTC

The entry of institutional investors has been credited as one of the major reasons for the crypto market’s rally which saw Bitcoin establish a new all-time high above $50,000. However, there are those who think that institutionals’ influence on BTC’s price as its market cap rose to a trillion dollars might be a bit overrated.

Bitcoin has come a long way and is now the eighth-largest tradable asset in the world in terms of market capitalization. For the first time, BTC’s market cap broke through the $1 trillion mark on February 19 as its price tripled in just three months, according to Cointelegraph. For comparison, it now sits above Tencent and is slightly below Google among the top 10 exchange-tradable assets.

While BTC’s market cap hitting a trillion dollars is indeed welcome news for crypto supporters, Cointelegraph argues that “there were no big institutional announcements leading up to the surge in market cap. In fact, the Coinbase premium was negative when this breakthrough happened, based on the Bitcoin Coinbase Premium Index by on-chain data provider CryptoQuant.

This was also the conclusion of CryptoQuant CEO Ki Young Ju who pointed out that retail investors and whales were responsible for the crypto’s price movement at that time. “The buying power seems mostly to come from stablecoin whales and retail investors, not institutional investors or high-net individuals in the U.S.,” he said.

Previous research by Glassnode revealed that 78 percent of Bitcoin’s supply is illiquid. The implication for this data is that the “supply-demand economics of the asset is only a small aspect of how its price is influenced,” the publication noted.

OKEx CEO Jay Hao opined that while institutional investors have some influence, the crypto’s rise to the trillion-dollar market cap could still have happened without their involvement. “This frenzy that included Elon Musk, Michael Saylor, and Senator Cynthia Lummis, could have helped BTC break the $1 trillion market cap without any final push from institutional investors who generally don’t buy when the markets are looking overstretched,” Jay Hao said.

He also suspects retail investors as mainly responsible for the rally. "At this point, many technical indicators suggest that BTC was beginning to look overbought as retail traders jumped in fueled by the ‘laser-eye’ trend that stormed Twitter with participants shooting for $100K BTC, including many leading CEOs and politicians,” the OKEx CEO added.

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