Bitcoin (BTC) Retail Participation Drops But Institutions Contribute to Supply Squeeze

The Bitcoin (BTC) price has given double-digit gains over the past week amid massive inflows registered by the spot Bitcoin ETFs. On Friday, BTC surged all the way to $53,000 and has been now settling down somewhere to $52,000. However, it seems that this week’s BTC price rally is largely due to institutions scooping up large supplies.

Bitcoin (BTC) Retail Participation Drops

Noted crypto analyst Ali Martinez has highlighted an intriguing correlation between the rising price of Bitcoin and a decline in the daily creation of new Bitcoin addresses. The crypto analyst notes that this indicates the drop in retail participation during the ongoing Bitcoin rally.

The crypto analyst adds that the current uptrend in Bitcoin’s price may be predominantly driven by institutional demand. As we know, most of it is coming in the form of major inflows to the spot Bitcoin ETF.

Martinez’s insights shed light on the evolving landscape of Bitcoin adoption, indicating a potential reconfiguration of market dynamics as institutional interest takes center stage.

On Friday, Ali Martinez also stated that Bitcoin whales have accumulated a massive 100,000 Bitcoins worth a staggering $5 billion.

ETF Inflows Cause Supply Shortage, But Liquidity Is Improving

Contrary to expectations of a supply shortage due to heightened demand from US spot Bitcoin ETFs, liquidity in the cryptocurrency market has actually improved since their introduction.

Bitcoin proponents like MicroStrategy Chairman Michael Saylor and Gemini co-founder Cameron Winklevoss have suggested that the pent-up demand from these newly launched funds is ten times the BTC production by miners. This surge in demand has contributed to Bitcoin’s over 20% rally this year. However, market data indicates that there is a surplus of tokens circulating within the market.

Speaking to Bloomberg, Michael Safai, co-founder at quantitative trading firm Dexterity Capital, said: “There’s plenty of liquidity, but it’s skewed to the ask side significantly”.

Another notable development drawing attention is the recent court ruling permitting Genesis to liquidate their GBTC holdings. This decision could potentially introduce additional selling pressure as these companies redeem shares and settle debts. Concurrently, selling activity from miners has been increasing, partly influenced by the upcoming Bitcoin code update aka Bitcoin halving.