Crypto Market Picks Up: Hedge Funds And Other Institutional Investors Fuel Bitcoin Rally

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Comeback: Bitcoin is in demand again – especially by institutional investors

Photo: ARMEND NIMANI / AFP

The recent rise in prices in the cryptocurrency market appears to be being increasingly driven by institutional investors such as hedge funds.

Private investors, on the other hand, are holding back after the turbulence surrounding the bankruptcy of the FTX platform.

The "Wall Street Journal" reports on the change in trading patterns: Private crypto investors, who had dominated the market for years, have pulled back sharply, according to the newspaper.

Instead, the institutions are becoming increasingly influential.

The most recent turbulence on the crypto market was probably the decisive factor: after the FTX collapse, the prices of Bitcoin, Ethereum and other crypto currencies collapsed at the end of 2022.

Various companies were sucked into the crash.

And many private investors were apparently also scared off in the long term.

Since the low point in November, however, prices have recovered strongly.

Bitcoin, for example, is currently trading at around $23,400.

It is around 50 percent above the level from the low point in November last year.

Observers justify the comeback with an increasing willingness to take risks on the capital investment market as a whole: Signals from the US Federal Reserve indicate that the time for raising interest rates in the fight against inflation could soon be over.

This attracts investors to riskier assets such as stocks or cryptocurrencies.

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Markus Thielen

from the research company Matrixport, for example, explains to the "Wall Street Journal" what indications he sees against this background for the increasing work of institutional investors on the crypto market.

Much of the crypto rally took place during Wall Street trading hours.

There were also particularly strong price gains immediately after the publication of US inflation data.

Such data is typically observed and taken into account by institutional investors, according to Thielen.

"We see that funds are significantly more active than private investors," agrees

, head of trading at the B2C2 platform.

Last year, private individuals accounted for 45 percent of the trade on his platform, according to Goh.

So far this year it has been 34 percent.

Coinbase stock has more than doubled year-to-date

Apparently, failed bets on falling Bitcoin prices also play a role, so that the Bitcoin comeback develops its own dynamic.

Various hedge funds have bet on lower Bitcoin prices, says

of Marex Solutions in London, according to WSJ.

As bitcoin is now rising, such actors would have to close their positions and acquire bitcoins to do so.

That also drives up the price.

However, the companies that earn their money in it are also benefiting from the comeback of the market.

The shares of the crypto exchange Coinbase, for example, have shot up in the past few days.

On Thursday of this week alone, the paper rose by around 24 percent.

Coinbase is now trading at a good $81.

At the beginning of January, the stock was available for $33.

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