Bitcoin Rebounds Strongly, Reclaims $70,000: Can Institutional Inflows Sustain the Bull Run?

Bitcoin Rebounds Strongly, Reclaims $70,000: Can Institutional Inflows Sustain the Bull Run?In the final week of March, Bitcoin's price rebounded strongly, reclaiming the $70,000 level, sparking heated market discussions. Despite a slight pullback in the US stock market, the cryptocurrency market demonstrated robust resilience

Bitcoin Rebounds Strongly, Reclaims $70,000: Can Institutional Inflows Sustain the Bull Run?

In the final week of March, Bitcoin's price rebounded strongly, reclaiming the $70,000 level, sparking heated market discussions. Despite a slight pullback in the US stock market, the cryptocurrency market demonstrated robust resilience. Bitcoin surged over 8% in the past 24 hours, reaching a high of $71,239.31, while Ethereum also rose 7.4%, hitting $3,634.80.

It's noteworthy that Solana (SOL) and Avalanche (AVAX) experienced the largest gains among the top 10 cryptocurrencies by market capitalization. Solana (SOL) soared over 9%, while Avalanche (AVAX) jumped from $53.60 to $58.30, representing an 8.87% increase. This phenomenon indicates a continued surge in market interest in Layer-1 blockchains, with investors seeking more scalable networks.

Beyond the cryptocurrency market itself, crypto-related stocks also performed exceptionally well. MicroStrategy's share price surged 21%, Coinbase climbed 9%, reflecting sustained institutional investor interest in the cryptocurrency space. The crypto mining industry benefited from Bitcoin's price rise as well, with Riot Platforms rising 9%, CleanSpark increasing 19%, and Cipher Mining soaring 13%, demonstrating investor optimism in the future development of the mining sector.

Bitcoin reserves held by exchanges have hit new lows, suggesting active accumulation by investors. On March 18, Bitcoin reserves on Coinbase reached a nine-year low of 344,856 BTC, indicating that investors are moving Bitcoin away from exchanges to more secure storage methods like cold wallets, rather than engaging in short-term trading. On March 25, total Bitcoin reserves across all exchanges reached 1.92 million, marking a three-year low. This trend signifies a limited amount of Bitcoin available for trading in the market, potentially fueling further price gains.

Although spot Bitcoin ETF inflows have slowed down, market sentiment towards Bitcoin remains bullish. Last week, inflows into US spot Bitcoin ETFs slowed, with Grayscale Bitcoin Trust (GBTC) experiencing continued outflows, while subscriptions for products from BlackRock and Fidelity also decelerated. However, this doesn't necessarily mean a decline in institutional investor interest in Bitcoin.

The buying interest from new funds launched by companies like BlackRock and Fidelity Investments has been insufficient to offset the selling pressure from Grayscale holders, which could be attributed to Grayscale's hefty management fees and the selling by bankruptcy trustees. According to Bryan Armour, an ETF analyst at Morningstar, Grayscale maintains a 1.5% management fee for its converted ETF, while BlackRock's fund charges 0.25%, with competitors even offering lower fees.

Digital wealth management provider Wealthfront has also opted to replace Grayscale's ETF with an iShares fund, citing lower fees and higher average daily trading volume. This trend suggests that ETFs with low fees and active trading appeal more to institutional investors.

Adam Sze, head of digital asset products at Global X, points out that asset reaching record highs often leads to profit-taking or a slowdown in buying, which could explain the decrease in spot Bitcoin ETF inflows. However, revitalizing Bitcoin ETF flows could hinge not only on price stability but also on more visible signs of institutional investor interest.

Kyle Da Cruz, director of digital asset products at VanEck, observes that most trading activity thus far has been driven by retail investors and a handful of hedge funds, and spot ETFs remain a nascent asset class, with "sticky capital" yet to fully enter the market. This perspective is echoed by Nathanal Cohen, co-founder of INDIGO Fund, who notes that despite the drag on ETF inflows, buy orders around the $60,000 level remain robust, signaling market eagerness to buy on dips.

Bitcoin has been in a consolidation phase over the past week after hitting an all-time high of $73,797.68 on March 14. Alex Thorn, global head of research at Galaxy Digital, believes this downturn "is entirely consistent with the normal course of short-term corrections within a historical bull market."

Sam Callahan suggests that messages from the Federal Reserve last week may have also impacted Bitcoin's price. Fed officials last week explicitly stated their consideration of interest rate cuts and a slower pace of quantitative tightening this year, actions that would improve liquidity conditions, acting as a positive catalyst for asset prices. Serving as a barometer for liquidity conditions, Bitcoin responded positively to the Fed's hints of potentially easing monetary policy in the near future.

Analytics firm 10x Research believes Bitcoin could set a new all-time high after breaking out of a consolidation pattern. Based on a symmetrical triangle pattern (a charting pattern in technical analysis), this breakout could foreshadow a push for BTC to reach $83,000. Markus Thielen, founder of 10x, stated: Our upside targets of $83,000 and $102,000 could slowly come into play.

While a slowdown in institutional inflows could temporarily affect Bitcoin's price, the market's long-term bullish sentiment towards Bitcoin remains strong. Investors are actively accumulating Bitcoin, with exchange reserves reaching new lows, suggesting a potential for further price gains. Bitcoin often exhibits cyclical fluctuations within bull market cycles, but its status as digital gold and its applications in decentralized finance will continue to attract institutional investor interest.

Looking ahead, investors need to pay close attention to the following key factors:

• The trajectory of Federal Reserve monetary policy: The direction of Fed monetary policy will significantly impact market liquidity, thus influencing Bitcoin's price.

• Institutional investor inflows: Institutional fund flows are a pivotal driver of Bitcoin's price gains, and their future movements demand close monitoring.

• Bitcoin ETF regulatory policies: The regulatory landscape for US spot Bitcoin ETFs will affect institutional investors' appetite for this asset class.

• Bitcoin technological advancements and expansion of use cases: Technological evolution and the expansion of Bitcoin's application space will further enhance its value, attracting more investors.

In conclusion, although short-term volatility is inevitable, Bitcoin remains poised to continue its upward trajectory in the coming years. Investors should maintain rationality, avoid excessive chasing of rallies and selling on dips, and pay attention to fundamental market changes to emerge victorious in the market.