Why now may be the best time for institutions to buy more bitcoin

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Bitcoin is priced at about $50k at the time of writing, and with a roughly 2% reduction in its price over the past 24 hours, the currency remains within range. Given the increased inflow of Bitcoin and stablecoins into exchanges, the rangebound price action may lay the groundwork for more investment in the commodity. Bitcoin’s outflow through exchanges continued to decline, after an initial increase in the outflow from Coinbase, which may be considered an indication of institutional purchase.

BTC Exchange Netflow || Source: CryptoQuant

Bitcoin’s exchange outflow continued to decline on the basis of the above-mentioned CryptoQuant map. As currency outflows are falling, the rarity narrative, which was pushing up prices, has slowed down and may contribute to a range-bound market action, just as it did in February and December 2020. On-chain metrics show that the trend is bearish, but the price is well above $45000, and this may be partly because institutions have purchased above this price point and fund purchases.

Danny Scott, CEO of CoinCorner tweeted on Bitcoin’s downtrend and large price swings, on Twitter.

 

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Inflows to exchanges have also decreased, but the decline in outflows is more important. However, this is optimal for expanded institutional inflows, because the last time there was a large bitcoin outflow from Coinbase, there was a chance of buying from banks. Because Coinbase has a plurality of institutional customers, the elevated outflow was a direct example of institutional purchases.

Despite the institutional purchase and the GBTC premium, the pricing action is limited at the time of writing and can increase the price. Institutional investors like Microstrategy and Grayscale will collect more bitcoin and have an effect on the metrics, although this is doubtful in the short term.

Institutional inflows will fuel market demand and on-site exchange sentiment, based on derivative exchange indicators such as open interest and trading value. In the long run, though, most of the institutional inflows came in at a time when the market held relatively within range and was waiting for a break out. Volatility is about 15.6 percent based on Woobull charts and this indicates that there will be more investment in Bitcoin in the coming weeks.

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