Bitcoin Surges to $69,000, Institutions Celebrate While Retail Investors Get Caught Holding the Bag?

Bitcoin Surges to $69,000, Institutions Celebrate While Retail Investors Get Caught Holding the Bag?On Tuesday, March 5th, Bitcoin (BTC) broke through the $69,000 mark per coin, setting a new all-time high. However, this frenzy was short-lived, as profit-taking emerged, pushing Bitcoin prices below the $60,000 threshold within hours

Bitcoin Surges to $69,000, Institutions Celebrate While Retail Investors Get Caught Holding the Bag?

On Tuesday, March 5th, Bitcoin (BTC) broke through the $69,000 mark per coin, setting a new all-time high. However, this frenzy was short-lived, as profit-taking emerged, pushing Bitcoin prices below the $60,000 threshold within hours. As of Wednesday morning, March 6th, Bitcoin prices had dropped nearly $10,000 from their peak, experiencing a decline of up to 10%. This wild price fluctuation has triggered not only market panic but also a massive wave of margin liquidations. Data from CoinGlass reveals that over $810 million in leveraged derivative trading positions across all crypto assets were liquidated in the past 24 hours.

Institutional investors play a pivotal role in this "boom and bust" scenario. Kevin, founder of Web3 CD and CEO of Full Speed Innovation Capital, points out that the recent Bitcoin surge was entirely driven by these American asset management giants, such as BlackRock, Ark, etc. They leverage their advantages, purchasing substantial amounts of Bitcoin to inflate prices while manipulating market sentiment through various means, leaving "almost no trading opportunities for retail investors."

What factors have fueled this "frenzy" in Bitcoin prices?

1. "Halving" anticipation: Bitcoin is set to undergo a new "halving" next month (April 2024). "Halving" refers to the halving of the reward for producing new blocks, occurring approximately every four years. This will decrease Bitcoin supply, and it's expected that on April 23, 2024, the block reward will drop from 6.25 BTC to 3.125 BTC. Historically, "halving" has been considered a significant driver of Bitcoin price increases.

2. Listing of Bitcoin spot ETFs: Earlier this year, the SEC officially approved applications for 11 Bitcoin spot ETFs, including those from institutions like BlackRock. This means ordinary investors can now invest in Bitcoin more conveniently, thereby boosting demand for the cryptocurrency. Currently, the assets under management of these 11 Bitcoin spot ETFs exceed $16 billion. Adding the Grayscale Bitcoin Trust (GBTC), which has been converted into an ETF, the total asset management scale of Bitcoin ETFs currently surpasses $40 billion.

3. Capital inflow: Data shows that Bitcoin ETFs attracted $5.9 billion in capital in February. From its listing on January 11th to the end of February, Bitcoin ETFs witnessed a capital inflow of $7.4 billion, while gold ETFs saw an outflow of $2.9 billion during the same period. The market speculates that a portion of investors have opted to sell gold ETFs and purchase Bitcoin ETFs.

However, this frenzy conceals considerable risks. Kevin warns: "Although Bitcoin's market cap will surpass that of gold in the long run, and its acceptance will become increasingly widespread, the risk lies in its boom-and-bust nature. After witnessing Bitcoin reach a new all-time high, retail investors might continuously enter the market, but that's when institutions will start distributing their holdings, and retail investors could become 'caught holding the bag.' Moreover, typical retail investors can't handle the drawdowns or losses inherent in the crypto market. A 30% plunge in Bitcoin within a single day is still a possibility, so for ordinary investors, cryptocurrencies represent a high-risk market."

It's worth noting that Gary Gensler, Chair of the SEC, has emphasized that while the SEC has approved the listing and trading of some Bitcoin spot ETFs, it has not endorsed or approved Bitcoin itself. Bitcoin is a speculative asset with high volatility, and investors should exercise caution regarding Bitcoin and products linked to its value.

The following sections delve into Bitcoin's current state and future prospects from different perspectives:

I. Bitcoin's "Halving" Effect

"Halving" is a crucial mechanism within the Bitcoin network. By slowing down the rate of new Bitcoin production, it maintains Bitcoin's scarcity. Historically, Bitcoin prices have witnessed significant surges after experiencing "halving."

1. Bitcoin Halving History:

• On November 28, 2012, Bitcoin underwent its first halving, with the block reward decreasing from 50 BTC to 25 BTC. After halving, Bitcoin prices ascended from $13 per coin to $1,100, an increase of over 80 times.

• On July 9, 2016, Bitcoin experienced its second halving, reducing the block reward from 25 BTC to 12.5 BTC. Post-halving, Bitcoin prices climbed from $600 per coin to $20,000, a surge of more than 30 times.

2. Why does "halving" drive Bitcoin price increases?

• Supply reduction: "Halving" causes the rate of new Bitcoin production to halve, thereby reducing the circulating supply of Bitcoin in the market.

• Increased demand: As Bitcoin supply dwindles, investors' demand for it rises, recognizing its increasing scarcity.

• Anticipatory psychology: Investors often anticipate the impact of "halving" in advance, starting to accumulate Bitcoin before the event, thereby pushing prices higher.

3. Anticipated Impact of the 2024 Halving:

• Due to historical precedent suggesting that "halving" propels Bitcoin price growth, the market widely expects a similar effect from the 2024 halving.

• However, it's crucial to note that market conditions and investor sentiment can evolve, making the price trajectory post-2024 halving uncertain.

II. Advantages and Disadvantages of Bitcoin Spot ETFs

The listing of Bitcoin spot ETFs is considered a significant milestone for Bitcoin's entry into mainstream financial markets. It provides a more convenient investment channel for ordinary investors, implying wider acceptance of Bitcoin.

1. Advantages of Bitcoin Spot ETFs:

• Convenience: Ordinary investors can invest in Bitcoin by purchasing ETFs, without directly interacting with cryptocurrency exchanges, lowering the investment barrier.

• Security: ETFs are managed by professional institutions, providing investors with more secure and reliable investment protection.

• Liquidity: ETF trading is more flexible, enabling easier capital inflows and outflows.

• Recognition: The SEC's approval signifies wider market recognition for Bitcoin, bolstering investor confidence.

2. Risks associated with Bitcoin Spot ETFs:

• Market volatility: Bitcoin prices are highly volatile, subjecting investors to elevated risks.

• Regulatory risk: Changes in regulations can impact Bitcoin markets.

• ETF-specific risks: The management quality and investment strategies of ETFs can also affect investment returns.

3. Impact of Bitcoin Spot ETFs on the Market:

• Market expansion: More investors can access the Bitcoin market through ETFs, expanding its size.

• Increased price volatility: ETF trading could exacerbate Bitcoin price fluctuations.

• Enhanced institutional investor participation: The listing of ETFs attracts more institutional investors to the Bitcoin market, potentially altering the market landscape.

III. Institutionally Dominated Market

In recent years, institutional investors have gradually emerged as the primary force in Bitcoin markets. They leverage their advantages, purchasing large quantities of Bitcoin to inflate prices, and manipulate market sentiment through various means, creating a market dominated by institutional investors.

1. Advantages of institutional investors:

• Financial strength: Institutional investors possess greater financial resources, allowing them to engage in large-scale investments.

• Professional capabilities: Institutional investors possess professional investment teams and risk management mechanisms, enabling more rational investment decisions.

• Market influence: Institutional investor investment actions significantly impact the market. They can influence Bitcoin prices through information guidance and trading strategies.

2. Impact of institutionally dominated markets on retail investors:

• Reduced retail investor participation: Institutional domination of markets could lead to diminished retail investor involvement, as they struggle to compete with institutions.

• Increased market risks: Institutional market dominance could result in more volatile markets, raising investment risks for retail investors.

• Risk of price manipulation: Institutional investors might exploit their advantages to manipulate prices, potentially harming retail investor interests.

3. Impact of institutionally dominated markets on the Bitcoin market:

• Enhanced market maturity: Institutional participation signifies Bitcoin markets moving towards greater maturity and rationality.

• Reduced market volatility: Institutional investors will make more rational investment decisions, potentially lowering market volatility.

• Strengthened market regulation: Institutionally dominated markets could promote Bitcoin market regulation, increasing market transparency.

IV. Bitcoin's Future Outlook

Bitcoin's future development hinges on multiple factors, including technological innovation, regulatory policies, market demand, and investor sentiment. Despite the risks associated with Bitcoin markets, its future prospects remain promising. Here are some potential outlooks:

1. Technological innovation: The Bitcoin network is continuously evolving. Technologies like the Lightning Network can enhance Bitcoin's performance.