Bitcoin reached a historical high of $99,600 on November 26 but then fell over 8% on the 27th, dipping to around $90,800. By December 3, the Bitcoin price had risen back to around $96,000, but volatility remained intense.
Now, Bitcoin is just one step away from $100,000, which is also a significant technical threshold. Breaking this price is not only a major psychological barrier but could also be a turning point for further price increases.
However, the market seems a bit hesitant as it approaches this key price point. On one hand, institutional funds like MicroStrategy continue to increase their positions, driving up Bitcoin demand and consequently pushing prices higher; on the other hand, many long-term holders choose to sell at higher prices to realize profits. This has led to a tug-of-war between large holders and institutions, increasing the difficulty of breaking through this price threshold.
In short, institutional funds continue to enter the market, but the selling pressure from long-term holders poses a significant challenge, making price increases more difficult.
Who is selling?
During this year-end rally, long-term investors are seizing the opportunity of increasing liquidity and demand to sell off their bitcoins in large quantities.
Since September, the amount sold by long-term investors has reached 507,000 bitcoins. Although this number is large, it has decreased compared to 934,000 bitcoins in March 2024.
It is worth noting that the current selling speed of long-term investors has surpassed the historical peak in March 2024. They are selling 0.27% of their total holdings daily, a sell-off pace that has only been exceeded on 177 days in history, indicating that these investors are now increasing their selling intensity.
Additionally, the U.S. government is also simultaneously selling its confiscated bitcoins. According to Arkham data, on December 3, the U.S. government transferred 19,800 bitcoins to Coinbase Prime, valued at approximately $1.92 billion.
These bitcoins are from the 'Silk Road' case, and the Northern District Court of California has allowed the government to dispose of these confiscated bitcoins according to the law.
Although Battle Born Investments previously attempted to contest these bitcoins through appeals, the Supreme Court has refused to hear the case, meaning these bitcoins may soon be auctioned off.
According to Dune data, the U.S. government currently holds 183,422 bitcoins, valued at approximately $17.64 billion, primarily from the Silk Road and Bitfinex hacking cases.
Who is buying?
Despite long-term holders reducing their holdings, there is still a significant influx of funds on the other end for Bitcoin. Especially large institutional investors, such as MicroStrategy and MARA, continue to show strong interest in Bitcoin, driving market demand through constant accumulation and providing support for Bitcoin.
From November 25 to December 1, MicroStrategy spent about $1.5 billion to purchase 15,400 bitcoins at an average price of $95,976 per bitcoin. Meanwhile, MicroStrategy also raised funds by selling stock to ensure further accumulation of Bitcoin.
According to company data, as of December 1, MicroStrategy holds a total of 402,100 bitcoins, valued at over $38 billion.
Furthermore, Bitcoin mining company MARA is actively increasing its Bitcoin reserves. On December 2, MARA announced it would issue convertible senior notes due in 2031 and raised the planned financing amount from $700 million to $850 million. The net proceeds will be used to purchase more bitcoins.
The continued buying by these institutions has formed a strong support for the Bitcoin market, offsetting some selling pressure from retail investors and conveying a long-term investment signal to the market.
Not only MicroStrategy and MARA, but other companies like SAIHEAT, Genius Group, and Anixa Biosciences have also started purchasing bitcoins as part of their asset reserves. In the current environment of low interest rates and rising inflation, more and more institutions view Bitcoin as a means of asset preservation and appreciation.
Moreover, the inflow of funds into Bitcoin spot ETFs has also reached a historical high, with a monthly inflow of $6.5 billion, far exceeding any previous monthly record.
Summary
It can be said that the Bitcoin market is at a critical turning point. The $100,000 price threshold could become the key node for this round of Bitcoin breakthroughs. With the continuous influx of institutional funds and steady growth in market demand, prices may attract broader market attention as they approach this important psychological barrier, pushing Bitcoin into a new phase.
However, institutions often show a wait-and-see attitude at such critical junctures, which may lead to some degree of fluctuation and adjustment in the market after a smooth upward trend, especially in the short term, where price volatility may increase, putting pressure on the market.
It is important to note that the investment goals and cost structures of institutions and long-term holders are different. Long-term holders typically hold Bitcoin at lower costs, aiming for long-term value growth. In contrast, institutional investors may face higher entry costs and, due to their large capital scale, can have a significant impact on market volatility.
Looking back in history, we see that many institutions entered at price peaks and ultimately faced the risk of a pullback. Therefore, although institutional participation injects new vitality into the market, investors still need to remain vigilant, carefully assess market risks, and avoid blindly chasing highs.
