“Global crypto hedge funds are apparently buying the Bitcoin dip”
Fresh data has suggested that a supply shortage of exchange-held Bitcoin (BTC-USD) in January may have been caused by exceptional hedge fund buying activity.
The data, courtesy of CryptoQuant, shows that the quantity of Bitcoin collectively held by all exchanges has dropped sharply in January so far, while the price of Bitcoin has increased during that time. Specifically, exchanges’ Bitcoin reserves recently plummeted to around 2.35 BTC, the lowest level since June of 2018.
In a post on X, André Dragosch, Bitwise’s European head of research, cited the data and argued that “global crypto hedge funds are apparently buying the Bitcoin dip”.
JUST IN: Global crypto hedge funds are apparently buying the bitcoin dip.🔥
1M beta of global hedge funds’ performance to BTC has increased from its recent cycle lows signalling increasing market exposure to bitcoin & other cryptoassets. pic.twitter.com/kJnrKNylpn
— André Dragosch, PhD | Bitcoin & Macro ⚡ (@Andre_Dragosch) January 13, 2025
The price of Bitcoin is currently hovering at around $97,000 after dropping from more than $100,000 to around $90,000 in mid-January.
This institutional crypto buying spree continues what may be a significant trend. Spot Bitcoin exchange-traded funds (ETFs) purchased around 51,500 BTC in December, while miners only produced approximately 14,000 BTC that month.
Analysis: Participating in a grand experiment
Since Bitcoin’s code mandates that there will always be only 21 million Bitcoin, talk of a supply shock may have been inevitable in the cryptocurrency market. After all, crypto exchanges must store a certain amount of available Bitcoin, and hedge funds are known for loading up when prices go down.
Instead of reacting with fear and loathing, perhaps Bitcoin investors should consider whether they really understand what they own. There are plenty of fiat currencies around, and they can all be printed without limitation; Bitcoin, meanwhile, is a relatively new technology and an experiment on what happens when currency unit printing is capped.
So far, it’s been a huge success as the Bitcoin price has rocketed from less than a penny to more than $90,000. On the other hand, JPMorgan Chase CEO Jamie Dimon and other financial luminaries have questioned the intrinsic value of Bitcoin.
In any case, don’t expect large-scale funds to quit stockpiling Bitcoin anytime soon. They’ll almost certainly contribute to the shrinking circulating supply of Bitcoin during the coming years — and if you’re a true Bitcoin believer, you might not have a problem with that.