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The scrutiny of crypto markets by lawmakers and regulators, including the debate over the crypto tax reporting provision of the U.S. Infrastructure Bill, may scare retail investors but not institutional investors , indicate recent data from Glassnode’s blockchain.
These big investors, represented by high-value dollar transactions, have fueled Bitcoin’s nearly 20% price gains since last week, the Berlin-based blockchain data company has found. A number of analysts say the trend shows these organizations are focusing more on the benefits of cryptocurrency than on potential hurdles.
“Investors are looking for the positive aspects of regulation rather than the negative ones,” said Joel Kruger, cryptocurrency strategist at the LMAX Digital Institutional Crypto Exchange, noting “that the US government is listening. and is aware that there is a provision around crypto in the Infrastructure Bill that needs further clarification.
Bitcoin’s on-chain transaction volume with values of at least $ 1 million has increased by 10% since early August and represents almost 70% of the total value transferred.
This blockchain metric represents the increase in institutional activity on the Bitcoin network, because “retail investors rarely move transactions. [with values of at least $1 million] on a scale to create such dominance, ”said Check Mate, blockchain analyst at Glassnode.
“The increasing dominance is also correlated with [massive] Coinbase exchange exits since December 2020, which we also attribute to probable US institutions, ”he added.
Meanwhile, small trades have declined as a percentage of the overall market, as shown in the chart below. Transactions worth less than $ 1 million have fallen to around 30-40% market dominance, down from 70% since July 2020.
The recent optimism from institutional investors comes as the crypto market monitors intense political and regulatory developments around the world, including a highly controversial $ 28 billion tax reporting provision on the 1,000 infrastructure bill. billion dollars in the United States and an ongoing crackdown in Europe and other regions against Binance, the largest crypto exchange by transaction volume.
Despite the potential for greater regulatory oversight, institutional investors are optimistic about the future of bitcoin, analysts and industry experts say.
“In general, institutions would support clear and fair regulation,” said Andrew Tu, executive at quantitative trading firm Efficient Frontier. “The recent price increase over the past week … has shown that the market is not responding strongly to concerns about regulation, as opposed to passing real legislation.”
On Monday, during the last infrastructure bill, U.S. Senator Richard Shelby (R-Ala.) Filed an objection to a compromise amendment to the crypto tax reporting provision. The amendment would have exempted validators of crypto transactions from a broad definition of “broker”.
Kruger said increased regulation helps validate the industry.
“It means the industry is recognized and ultimately contributes to acceptance and adoption,” Kruger said.
Others have also said that the crypto market has become more accustomed to news from regulators as the industry matures.
“The crypto market is very accustomed to regulatory concerns, especially OG crypto holders (long-time holders) who have experienced several rounds of regulatory uncertainty,” Tu said.
Indeed, on a median basis of 14 days, the average number of days each BTC traded remained idle or immobile, edged up to around 10 days from seven days, according to Glassnode, which means that some bitcoins’ old hands don’t. take no exit liquidity at this point. “
Market fundamentals are getting stronger and healthier
Instead of focusing on regulatory uncertainties, institutional investors have pointed to strengthening bitcoin market fundamentals as a justification for their optimism.
“Regulatory concerns don’t have as much of an impact on bitcoin here as they do other cryptocurrencies, and sentiment behind bitcoin has been showing signs of change for a few weeks now,” said Noelle Acheson, Head of Market Insights at Genesis. (Genesis is owned by CoinDesk’s parent company, Digital Currency Group.)
On the supply side, the illiquid supply of bitcoin, or the balance held by illiquid entities, recently hit an all-time high, meaning the oldest cryptocurrency has a weak supply.
Perpetual derivatives market funding rates turned positive again after being negative for most of June and July.
Calculated every eight hours, the funding rate refers to the cost of holding long / short positions in the perpetual bitcoin market (futures without expiration). The metric is used by exchanges offering perpetuals to balance the market and guide perpetual prices towards the spot price.
A positive fund rate means longs are paying shorts to keep the position open, and the market is bullish. Meanwhile, a negative funding rate implies bearish market positioning.
As CoinDesk reported, bitcoin’s call open position ratio also recently dropped to its lowest level this year due to increased activity in calls or bullish betting.
At the time of going to press, bitcoin was changing hands at $ 46,201.20, up 5.32% in the past 24 hours, according to CoinDesk 20.
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