Did institutional investors crash the crypto party?

with s drug dealer Danny knew exactly when the 1960s were over. "They sell hippie wigs in Woolworths, man. The greatest decade of human history is over," he complains about the cult classic.

On Tuesday, Coinbase welcomed the "secular tailwind of crypto acceptance among the institutions". But could this statement be indicated in a week with faulty stable coins, unexpected bankruptcy gather and widespread bloodbath that the glorious days for digital assets are finally over?

by Morganstanley:

Small investors are no longer the dominant crypto dealer. The largest proportion of the daily crypto trade volume comes from crypto institutions, a large part of which comes from the trade. For example, stock exchanges, storage and cryptofonds. Retailers dominated about four years ago when Bitcoin was traded below $ 10,000. We believe that the increased participation of institutions that are sensitive to the availability of capital and thus to interest rates, sometimes contributed to the high correlation between Bitcoin and stocks

chainanalysis is very roughly estimated that institutional investors (each with more than $ 10 million to play) made 44 percent of the entire crypto trade at the end of the second quarter of 2021, compared to 8 percent less than a year earlier.

Analysts of the data provider Vandatrack indicate that a large part of this interest focuses on Bitcoin and Ethereum:

Customer interest [IS] focused more on the two most important crypto-assets BTC and ETH. This is important, because while more and more institutions are waiting for the first results of the Executive Order of the White House for Crypto Regulation (early June) and ETH fusion for ETH 2.0 (late summer), the current price behavior will continue to be from Tradfi systems (i.e.). And since interest movements drive the behavior of risky assets, BTC and ETH will remain heavily correlated high beta games on tradfi in the near future.

Bitcoin should serve as security against inflation, detached from central bank policy. Unfortunately, his seeping into the mainstream means that it now behaves like any other risky asset.

Interestingly, Morgan Stanley assumes that crypto reacts more sensitive to the money supply than changing interest rates. "Crypto prices rose in the years 2020 and 2021 because the central banks increased the Fiat money volume," the banknotes say. "Now the Fed is tightening, crypto and stock markets correct down."

The annual growth of the global money supply (M2) reached its peak in February 2021 and the growth of Bitcoin's market capitalization reached its peak a month later in March 2021. The US Federal Reserve confirmed last week that it will continue to raise interest rates and start reducing the size of its balance sheet in June, which indicates that times of plenty of liquidity are really over .

Speculative risky assets such as cryptocurrencies were rated lower because their higher prices (compared to 2019) were justified by the extensive USD creation. The correlation between Bitcoin and stock indices is still high and will continue to do so, unless Bitcoin is widespread as a means of payment - which is unlikely that this will be done soon.

The fat-printed section implies that cryptocurrencies-and stocks-may have to continue to fall as soon as the Fed begins in June to shorten its bond portfolio of $ 9 trillion.

Analysts from JPMorgan estimated last week that the bonds have to increase by a further 200 basis points before the stock risk premium drops to the standards before the Lehman crisis.

Bitcoin can be high at the pixel period, but that does not mean that a floor has been set. Camberwell carrot, someone?