Bitcoin: Why this trend is ‘fairly constructive’ for its price

Institutional investment pouring into Bitcoin only increased over the past year, even as the asset’s price has largely retracted during this time.

The report released by the analytics firm Glassnode on Monday highlighted that the dominance of Bitcoin transactions worth $1 million more than doubled in the 11 month period between September 2020 and August 2021. Even as the bearish correction caused the asset’s price to fall over 30% from its ATH 4 months back, transactions exceeding $1 million surged from 30% to 70% of the total value transferred during this time.

Source: Glassnode

This trend likely emerged due to the surge in prices last year and the increased amount of institutional interest that followed. Moreover, the report pointed out that a majority of these transactions were carried out when the exchange rates for BTC had fallen below $30k, indicating that the spike in bulky transactions was inversely proportional to Bitcoin’s price action. The report further elaborated,

“As the market traded down to the lows of $29k in late July, the $1M to $10M transaction group spiked markedly, increasing dominance by 20%… These large-size transactions are more likely to be accumulators than sellers and is again, fairly constructive for price.”

Data by Santiment, another crypto analytics firm, further strengthened this view. In a recent tweet, the firm had revealed that whale accounts had increased their accumulation of the king coin over the past week, as accounts with 100 to 10,000 BTC gained over 100,000 coins during this time.

On the flip side, however, a structural decline in small size transaction dominance was noted by the aforementioned report. During the same 11-month period, volume of transactions worth less than $1 million fell from 70% to around 30%-40%.

Source: Glassnode

This indicated that small-time investors liquidated their holdings early to maximize their profits in the face of market corrections. The report concluded that,

“These two charts clearly demonstrate a new era of institutional and high net worth capital is flowing through the Bitcoin network since 2020.”