Bitcoin institutional demand staged a reversal in recent weeks as the digital asset rallied during the Gulf crisis while traditional markets declined, according to CoinShares.
Key Takeaways:
- Bitcoin ETF products reversed five weeks of outflows with $2.3 billion in fresh inflows.
- Institutional demand exceeded 53,000 bitcoin in March, with MicroStrategy buying 40,000.
- Bitcoin rose 7.1% during Gulf tensions while equities fell 6.5% and gold dropped 10.1%.
Bitcoin exchange-traded products recorded $2.3 billion in fresh inflows since the start of the current crisis, reversing a five-week outflow streak, according to CoinShares. The digital asset has risen 7.1% since tensions escalated, while equities fell 6.5% and gold dropped 10.1% over the same period.
The performance marks a departure from previous geopolitical shocks, when bitcoin typically acted as a release valve as investors reduced risk across portfolios, according to the CoinShares Bi-Weekly Digest published Wednesday.
See more: 1 in 6 Iranians Turn to Bitcoin Amid Crisis
The market entered the crisis in cleaner condition than prior periods, according to the report. Large holders sold an estimated $39 billion worth of bitcoin over the five months before the conflict began, which pushed prices lower and technical indicators into territory that historically signals undervaluation.
That selling pressure reduced leverage in the market and exhausted much of the motivated selling, meaning fewer investors were left looking to exit positions, according to CoinShares. When fresh demand arrived, there was little supply overhang to absorb it, leaving the market positioned to move higher.
Bitcoin Institutional Demand Shifts Narrative
Public companies and ETFs drove bitcoin institutional demand in March, with net inflows exceeding 53,000 bitcoin, according to Matthew Kimmell, investment strategist at CoinShares. MicroStrategy, Inc. (MSTR) alone purchased more than 40,000 bitcoin during the month.
The reacceleration follows a difficult first quarter for bitcoin, which fell 22% to close near $68,000, according to Kimmell. However, since the Iran conflict began on February 28, bitcoin has rallied 8%.
Portfolio performance data supports the case for institutional allocators, according to CoinShares. A four percent allocation to bitcoin in a balanced 60/40 portfolio would have increased annualized returns from 8.9% to 14.8% since 2017, while increasing maximum drawdown by only 1.5%.
Spot inflows reached $618 million recently, with $489 million into bitcoin and $123 million into Ethereum, according to CoinShares. A $145 million unwind in short positions added fuel, contributing to a brief spike in the bitcoin basis to 8.5% before settling back around 5%.
The shift in bitcoin institutional demand during geopolitical uncertainty represents the clearest evidence yet that investors are allocating into the asset during stress events rather than retreating, according to the report.
For more news, information, and strategy, visit the CoinShares Crypto ETF Hub.
