• May 27, 2022

Relationship between institutional investors and cryptocurrencies: Are they sinking the market now?

Relationship between institutional investors and cryptocurrencies: Are they sinking the market now?

Within a scenario of bearish positions and capital withdrawals, institutional investors represent a “considerable” importance. After the traditional market and cryptocurrencies came closer over the past year, large capitals have more power in front of retail buyers.

Concordance in the market lows

The bearish movements that have been observed in recent months correspond to a trend that combines different areas. In this way, the crypto sector gained strength with the interaction of different communities.

Among them, retail investors and the large capitals of institutional investors play a “determining” role in charting a particular course in cryptocurrencies. Although initially, the equity sector was not so attracted to digital assets, its position would gradually change.

The price performance of the crypto market is within an environment where new analyst perspectives arise. More and more, the institutional sector is getting involved in quotes linked to Bitcoin and other cryptos, with volumes of money that influence with some force.

From the extreme of stock market values and index scores on Wall Street, institutional investors create trends that impact the crypto world. The decisions made by shareholders and large hedge funds play actions that shake the blockchain.

Will trust continue in the face of crypto?

As 2021 ended, the interaction of these investors was increasing, a situation whose repercussion generated a formidable increase in valuations. Both the stock market indices and the main cryptocurrencies rose to record new all-time highs.

Having similar trends, these sectors changed course, and institutional investors took action on the matter. The creation of the new peaks contracted a massive correction batch, which sellers took advantage of to take the profits obtained from digital assets.

At the same time, Wall Street indices began to lose strength, causing money to go to safe havens and the liquidity of the US dollar. Interest rate increases, which benefit the USD, attracted the eyes of the market, whose movements “abandoned” Bitcoin and stocks.

While the BTC price (at $30,526.03 at the time of this publication) is trying to recover, institutional investors hold considerable capital with a wait-and-see stance in the face of the current correction. Source: TradingView.
While the price of BTC (at $30,526.03 at the time of this publication) is trying to recover, institutional investors have considerable capital with a waiting posture in the face of the current correction. Source: TradingView.

Although the crypto world is being coupled to equities with government intentions to create “friendly” regulations, a low season has arrived that extends the uncertainty of analysts.

Nevertheless, institutional investors are moving large amounts of money, with a market share that already represents 2 thirds of the volume of capital in buying and selling operations. In short, the “massive” withdrawal of institutions has shaken the strength of cryptocurrencies. Their capitals would be waiting for some indication of stability to try to buy the holdings.