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In the last month, the cryptocurrency market recorded one of its worst sell-offs in 2018, when the price of Bitcoin dropped by 35 percent.
Jake Chervinsky, a government defense lawyer and lawyer for Kobre & Kim stock disputes, suggested that while retail traders or individual investors sell cryptocurrency currency markets, institutional investors will they are accumulating.
he he wrote:
"Investors, with bitcoin trading under $ 4,000: Retail:" Should I sell and buy back less? Should I open a short? Should I just give up? Is it going to zero? After all, all this cryptography was a scam? " continues to sell us cheap bitcoins, thank you. & # 39; "
Are institutions really buying?
Chervinsky's statement led to a series of debates within the cryptocurrency community, mostly triggered by skeptics who questioned the involvement of institutional investors in the market given the lack of momentum of key digital assets.
If institutional investors have accumulated Bitcoin in the last month, the price of BTC should be increased, rather than falling, by more than 35%.
Chervinsky explained that professional traders and institutional investors are very cautious about accumulating new assets and often investing in a way that has a minimal impact on the short term price performance of the asset or currency.
"The problem, however, is concluding that" as institutional investors are buying, the price will rise immediately. "Professional traders are experts in the accumulation of resources without affecting the market," Chervinsky said, adding that institutions do not take long naked positions on speculative activities like Bitcoin.
"None of the investors and traders I've worked with take long naked positions on speculative activities.When they buy the spot, they cover themselves simultaneously in other markets to reduce the risk." Hope has nothing to do with this. . "
Institutional investors tend to invest in speculative activities through the over-the-counter (OTC) market. In the case of Bitcoin, due to its lack of liquidity, institutional investors must rely on trusted custodians such as Coinbase Custody and Fidelity Digital Assets to buy or sell large amounts of BTC.
OTC market participants and custody solutions providers are not required to share their trading volumes and, as a result, data held by OTC trading is rarely disclosed. Due to the lack of information offered by OTC exchanges, it is difficult to support the claims that the institutions are accumulating the BTC to a large extent.
But, as Chervinsky said, there are indications that investors may consider presuming that institutional investors are investing in the asset class. Grayscale investments that report high inflows and university endowments such as Yale taking positions could mean a growing demand for Bitcoin from the traditional financial sector.
It is not clear whether the institutions are simply interested in cryptocurrencies or actively accumulate Bitcoin as a long-term investment.
Currently, the demand for Coinbase Custody, Bakkt and Fidelity DIgital Assets is one of the limited ways to justify the institutional demand for cryptography and recently, Bakkt confirmed that demand is growing rapidly.
Apart from this, it is difficult to quantitatively prove that the institutional application of encryption is in fact strong and that institutional investors accumulate Bitcoin.
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