The first phase of bitcoins recent withdrawal has not sparked panic among institutional investors, according to crypto asset management firm CoinShares.
Professional distributors reduced exposure modestly but largely maintained their positions compared to last year. Advisers trimmed holdings while hedge funds fell back along with broader leverage relaxed and shifting opportunities in other markets, the crypto investment chief said in a Tuesday report.
Longer duration investors continued to accumulate. “Endowments, pensions and sovereigns continued to build quietly,” wrote analyst Matt Kimmell.
Bitcoin has struggled to regain momentum since reaching record highs near $125,000 in early October. The world’s largest cryptocurrency was trading around $72,370 at the time of publication.
Crypto markets have delivered muted performance in recent months as a mix of macro and market-specific pressures weighed on prices. Higher interest rates and a stronger dollar have dampened appetite for risk assets, while leveraged positions built earlier in the rally have been wound down. At the same time, profit-taking by long-term bitcoin holders and uneven flows into spot exchange-traded funds (ETFs) have limited momentum, leaving the sector struggling to regain a sustained uptrend.
Despite bitcoin falling about 23% in the period, global bitcoin ETF flows remained positive, suggesting the fourth-quarter selloff was driven more by long-term holders taking profits than by new institutional money exiting the market, Kimmell said.
Historically, crypto bear markets have redistributed supply from short-term traders to long-term owners. According to Kimmell, the emergence of ETFs now offers a new way to observe whether institutional capital follows the same pattern.
So far, the data points in that direction. A roughly 25% quarterly drawdown did not trigger broad institutional capitulation, the report said, with most declines in assets under management reflecting price movements rather than large investor outflows.
Still, CoinShares cautioned that the sample size remains small. The firm said the real test may come in upcoming regulatory filings, which will capture institutional behavior during sharper moves, including bitcoin’s slide toward $60,000 and a 17% drop in one day.
Bitcoin and the broader crypto market edged higher this week, bouncing back after weeks of choppy trading. The rally was fueled in part by renewed risk appetite across markets and steady demand for bitcoin ETFs, helping the largest cryptocurrency regain momentum and lift major altcoins alongside it. Traders also pointed to short covering and positioning resets after the recent sell-off as factors behind the move.
Read more: CEO of crypto investment firm Keyrock says bitcoin is undervalued and entering ‘transitional year’
