Are Big Players No Longer Interested In Bitcoin?

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Bitcoin prices are trending higher, but big players seem hesitant to buy into the current rally.

Bitcoin Reserves Falling

On-chain data shows that exchange, digital asset banks and miner BTC reserves are relatively lower. Over the past few weeks, the spot price of BTC has soared more than 40%, bottoming around $15,300 recorded in Q4 2022. Bitcoin has now risen to retest $23,300, reaching a new Q1 2023 high.

Bitcoin Price January 23rd
Bitcoin Price January 23| Source: BTCUSD on BitStamp, Business View

As history shows, the spike in Bitcoin prices should be behind solid support, mainly from heavyweights, including miners and digital asset banks.

Bitcoin miners tend to have large reserves of BTC at any given time, as they need to liquidate from time to time, encountering operation costs. In recent months, following the drop in Bitcoin prices coupled with a high hash rate potentially making mining success more difficult, their reserves have dwindled.

Looking at the Reserves of Bitcoin Miners and Digital Asset Banks

According to streamsBTC reserves fell from 1.847 million on January 12 to 1.836 million in January 2023. During this time, the price of Bitcoin has been on a bull run, asking if the pump is on an empty tank.

It should be noted that miners tend to unload their coins when unsure of the price trajectory in weeks and months ahead.

Their selling deluge is spiking the upward momentum and could even push the coin lower. However, when miners are confident about what lies ahead, they pile in, expecting the change in trend to result in tidy profits. Therefore, the current divergence between reserves and prices could be a bearish signal.

Besides miners, digital assets bank reserves are declining. Digital asset bank reserves refer to BTC held by these regulated institutions. Over the past few months, following the collapse of FTX, Alameda Research, and the effects it had on other players, including DCG and Genesis Global, their activity has been almost non-existent.

The contraction means that institutions are playing it safe and may not want to accumulate and store their coins in these crawls. During the last bull cycle, from 2020 to 2021, there was remarkable activity between banks of digital assetspointing to a possible interest of institutions.

Although traders and optimists could interpret the recent rebound in crypto prices as a net positive for BTC, the absence of leads, judging by institutional activity, may question whether the current rally would last much longer.

There may be a regulatory angle affecting the involvement of digital asset banks. Government agencies are questioning whether crypto venture capital and service providers did adequate due diligence before exposure to crypto in the last bull cycle.

At the same time, some digital asset banks are reducing their crypto exposure, affecting performance.

Feature Image by Dado Ruvic/Reuters, Chart via Business View

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