Bitcoin Fund Holdings hit lowest levels since 2021: What does this mean for BTC?
In the latter half of 2023, there has been a lot of talk and anticipation surrounding spot Bitcoin ETFs. However, on September 5, there was a significant decrease in the amount of Bitcoin held by trusts, ETFs, and funds, reaching the lowest level since February 2021.
Interestingly, CryptoQuant’s ‘Bitcoin Fund Holdings’ metric appears to have a slight correlation with the price of BTC. As funds dispose of their coins while the price remains stable, this correlation gap widens.
According to data from Finbold, on September 5, funds, ETFs, and trusts held a total of 685,271 BTC ($17.54 billion). This metric reached its peak in May 2021 at 740,000 coins but experienced a significant decline during the challenging bear market in June 2022.
Since then, the amount of Bitcoin held by funds has steadily decreased, despite the recovery of BTC’s price in June 2023. This has created a significant divergence between these two metrics, which were highly correlated in the past two years.
This divergence could suggest one of two possibilities:
- The price of Bitcoin will drop to align with the amount held by funds.
- These entities will enter a new accumulation phase to align their holdings with the positive price performance of BTC.
It is worth noting that the last time Bitcoin Fund Holdings reached these low levels was in early 2021. However, there were not as many funds, ETFs, and trusts back then, as institutional adoption of BTC was not as widespread as it is now.
The institutional adoption of Bitcoin played a significant role in driving the bull market of 2021 for the cryptocurrency.
As the circulating supply of Bitcoin continues to grow, there is a constant need for more demand in order to achieve previous price levels. Interestingly, if Bitcoin ever reaches its all-time high market cap from 2021, it would be trading at $66,838, which is $2,207 (3.19%) lower than its previous all-time high in US dollars.
At the time of writing, Bitcoin is trading at $25,600.
Hot Take:
The decline in Bitcoin Fund Holdings to 2021 lows raises questions about the future of BTC. Will the price drop to meet the amount held by funds, or will these entities enter a new accumulation phase? Only time will tell.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative, and there is a risk of capital loss.
This article was originally published on Finbold.
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