Wall Street’s Struggling Bitcoin Investment Leaves Retail Investors in the Dark

Bitcoin’s Stability Questioned Amid Institutional Retreat

Bitcoin Holdings by Digital-Treasury Plunge

The stability of Bitcoin, often seen as secure through Wall Street’s adoption, is facing challenges. Digital-asset treasuries have significantly reduced their Bitcoin holdings, dropping from 64,000 Bitcoins in July to just 15,500 by September, according to CryptoQuant. This represents a dramatic 76% decline from the summer peak, coinciding with Bitcoin’s nearly 6% drop in the past week, alongside Ether.

Treasuries’ Share Prices Under Pressure

Many treasuries, previously utilizing PIPE deals to amass billions, have seen their share prices plummet by up to 97% below their initial offering prices. This has uncovered vulnerabilities that investors believed were previously resolved. Valuations are compressing, as the premium once paid above Bitcoin reserves’ value—measured by the market-cap-to-NAV multiple—has collapsed, aligning market values more closely with their underlying assets.

Challenges for Institutional Confidence

Markus Thielen from 10x Research noted that limited transparency in acquisition prices, share counts, and dilution from warrants is diminishing confidence. Additionally, regulatory bodies are examining unusual trading activities in treasury shares. The lack of financial strength in these treasuries has diminished their role as countercyclical buyers, removing a crucial support mechanism.

Veteran Traders Weigh In

• Morten Christensen, a veteran trader, highlighted the surge in treasury activity as a potential peak signal, emphasizing the dangers of over-relying on institutional flows.
• Meanwhile, retail demand is on the rise.

Retail Demand Counterbalances Institutional Flow

The iShares Bitcoin Trust ETF witnessed an influx of $2.5 billion in September, a significant increase from $707 million in August, according to Bloomberg data. However, derivatives markets are experiencing strain, with $275 million of Bitcoin longs liquidated in just 24 hours.

A Shifting Crypto Market Landscape

Jeff Dorman, chief investment officer at Arca, speculates that the weakness could be less about direct selling and more related to the absence of a major buyer. The reduction in institutional involvement, combined with steady retail inflows, might indicate a new era for the crypto market. This transition could lead to a more fragmented demand landscape, as the once-promised corporate safety net gives way.