In recent days the crypto markets have been bleeding with millions in liquidations for leveraged positions. The price of the most popular cryptocurrency, Bitcoin, broke below the critical $100K level reaching prices as low as $95K. This fall in the price of Bitcoin has triggered social media claims that institutions and whales were involved in a massive dumping of the asset causing the price to continue falling. One of the most mentioned institutions in the Bitcoin dumping claims is MicroStrategy, which has been rebranded Strategy. A few days ago, claims circulated on X that Strategy, one of the biggest institutional holders of Bitcoin, dumped thousands of Bitcoin causing its price to tank. These posts became the most popular and raised a lot of debates on this issue.
Let’s dig in and find out the truth about this claim.
According to careful analyses of onchain data, the long term holder supply of Bitcoin has remained near all time highs. This is a show of conviction, rather than capitulation from long term holders. And according to Glassnode, long term Bitcoin holders still control the majority of circulating Bitcoin. They only have modest distribution during corrections.
Also, fewer Bitcoin sits in centralised exchanges like Coinbase and Binance as compared to the previous cycles. This would not be the case if there was a coordinated large sell off. Instead, when there is fewer Bitcoin in centralized exchanges, the claim of coordinated sell offs contradicts the idea.
In addition, many whales have shown a mix of profit taking and accumulation. It’s not a one way exit as touted by some accounts on X. There are still institutions and whales who are accumulating Bitcoin even when the retail is in panic mode. Analysis from IntoTheBlock and Glassnode frequently highlights the rotation between short term traders and long term holders rather than outright liquidation events.
Spot ETF outflows, exaggerated as dumps
Big institutions in the Bitcoin spot ETF space like BlackRock and Fidelity have seen both periods of inflows and outflows. However, data does not show a relentless dump. During some weeks there are net outflows in ETFs, and usually this is what online influencers exaggerate as online institutions abandoning Bitcoin. However, there are reports that long-term cumulative inflows remain positive. This is an indication that institutional adoption of crypto is still ongoing and the perceived exit is all fake.
It is important for us to note that, some of the short term ETF outflows that are touted as dump are just driven by profit taking and portfolio rebalancing. Sometimes, they are driven by macro risk off sentiments such rates and the strength of the dollar.
Why the Strategy is dumping Bitcoin story is persisting
The main reason why the story of Strategy dumping Bitcoin is persisting is that of cognitive bias.
It is in human nature for us to find a villain to blame whenever anything goes wrong. Usually when markets dump, people always look for a simple villain to blame, if it's not an institution, it's a whale or quant strategies. Villains, even made up ones, are easier to blame than market complexity. Therefore, this is the reason why Strategy has fallen victim to all these rumours.
With the monetization of social media claims, influencers have become more shameless using rage bait and emotional blackmail to generate views. Extreme claims like using institutions as villains for the market dump grab more clicks and views than the nuanced on chain analysis. Sometimes institutions like Strategy move their assets around as they reposition their custodians and assets. And this is sometimes mistaken as coins transferred to exchanges for massive dumping by influencers.
Single large transactions or ETF outflows in days usually get ripped from context. Influencers will ignore the longer time frames and netflows just to push a narrative for clicks.
The likely truth about what is happening in the market
There is no need to hide the fact that many whales who have been holding for long seem to be selling to make a profit. After all, what is the main purpose of investing or trading if you cannot take profit? So, yes holders have the right to sell for profits, however, many are selling small portions. This is very normal in every bull cycle.
Some investors are rotating funds within the ecosystems. In both investments of Bitcoin and speculative altcoins, during risk off phases, investors can move funds between assets to hedge against or for high volatility periods.
And finally, some of the major drivers of Bitcoin prices are rate expectations, the strength of the U.S. dollar and liquidity conditions. All these and other macroeconomic influences can add a lot of noise to crypto markets and many might believe it's the dumping by institutions.
Final thoughts and conclusion
So, did Strategy dump a lot of Bitcoin into the market in recent weeks? Well, there is absolutely no evidence to support that! Medium to long term on chain and institutional data does not validate this claim at all. In fact, many reports are saying that Strategy has actually been accumulating more. It is therefore very important for traders, investors, influencers and analysts to rely on data rather than fear or taking someone’s word for it. Data from tracking long term holder supply, exchange balances and ETF flows across different time frames can give you a true picture of what is really happening.
And finally, understand volatility as it will always be an integral part of any financial markets. Leverage flushes, short term ETF rebalancing and normal profit taking will all create volatility time and again.
My Affiliate links
For crypto trading I use Okx and Kucoin:
https://www.kucoin.com/r/rf/QBSY1VX3
For forex trading I use justmarkets and FBS
https://fbs.partners?ibl=1028825&ibp=33282156
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For synthetics trading 24/7 markets I use deriv and Weltrade
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References
- Glassnode – Long-Term Holder & Exchange Balance Data
https://glassnode.com - CoinShares – Digital Asset Fund Flows Weekly Reports
https://coinshares.com/research - BlackRock iShares – IBIT Spot Bitcoin ETF Data & Flows
https://www.ishares.com/us/products/333411/ishares-bitcoin-trust - Fidelity Investments – FBTC Spot Bitcoin ETF Information
https://www.fidelity.com/etfs/fidelity-crypto-industry-and-digital-payments-etf/overview - IntoTheBlock – On-Chain & Large Holder Analytics
https://www.intotheblock.com
