B2C2 Sees Evidence of Institutional Money Driving Bitcoin Higher
Posted by Colin Lambert. Last updated: October 13, 2021
Flow analysis released by cryptocurrency liquidity provider B2C2 hints that the latest surge in cryptoassets, led by Bitcoin, could have been driven by institutions.
Although largely seen as an event-driven asset class, B2C2 says that activity in the first full week of October not only supported the notion of Bitcoin gaining traction as an inflation hedge/risk off asset, but that institutions were behind the surge from $48,000 to $58,000 over the week.
In its buy/sell ratio by categorisation, B2C2 says that flows were moderately biased to the former, however on crypto exchanges, largely used by retail accounts, there was a 57.4% bias towards selling. “The fact that crypto exchanges continue to be the notable outlier, as the only category net selling overall, [implies] that this move may be driven primarily by institutional money, with retail on the sidelines,” b2C2 says in its analysis.
Additionally, the firm says in the futures market it has seen noted weakness in perpetual basis related to short positions on Chinese exchanges, some of which were liquidated during the sharp rally through $53k, but it adds that longer dated basis continues to drive higher, “supporting our thesis that most buying is institutional, while retail remains sidelined”.
Further, B2C2 says a marked uptick in CME basis also stands out, observing that CME is typically a venue for large US institutions, who cannot face unregulated exchanges. B2C2 says that until now, these players have focused on playing the cash and carry trade, keeping the basis suppressed relative to unregulated exchanges. Currently, however, end-Oct CME annualised basis has risen to 20%, it reports (as of October 11), noting this is as high as any other exchange basis, “indicating a qualitative change in activity on CME, away from cash and carry to outright buying”.