September 30, 2022

Institutional Investors Bought Bitcoin From Long-Term Holders In Late 2020: Report

2 min read

The narrative that institutional investors drove BTC’s price into the stratosphere in late 2020 received another confirmation from a research paper compiled by the popular exchange OKEx. The company’s document pinpointed Paul Tudor Jones’ endorsement of bitcoin in mid-2020 as the turning point for institutional adoption.

PTJ Changed The Bitcoin Game

It was early May, the world had started to feel the adverse effects of the COVID-19 pandemic, global economies had begun contemplating their next move, while bitcoin was recovering from the mid-March slump and was preparing for the upcoming halving.

While most community members speculated if the event was already priced or not, one of the most celebrated and respected US hedge fund managers, namely Paul Tudor Jones III, issued what should have been a routine market outlook. An initiative he has done numerous times throughout his long career.

What made this one different, though, was the endorsement of bitcoin. Moreover, the hedge fund legend even admitted that he purchased BTC, or as he called it – “the faster horse” – to fight the increasing inflation prompted by the governments’ initiatives to print excessive amounts of fiat currencies in a short period.

Although his words were reported by various media outlets at the time, it turns out that they’ve impacted the BTC ecosystem significantly more than anyone could have expected. Or, at least that’s what OKEx’s 2020 report said.

By partnering with the on-chain monitoring resource Catallact, the exchange noted that the percentage of transactions worth 1,000 BTC, which OKEx classified as “falling outside the range of retail investors and traders,” exploded from 5% in June to over 45% in September.

Bitcoin Transactions Over 1,000 BTC Vs. BTC Price. Source: OKEx
Bitcoin Transactions Over 1,000 BTC Vs. BTC Price. Source: OKEx

After this peak, such on-chain transactions declined slightly until the end of the year but still remained high above 30%.

“The conclusion we may draw from this on-chain data is that institutional investors really piled into the BTC space after Paul Tudor Jones announced his entrance – and they didn’t stop as 2020 came to a close.”

HODLers Sold Bitcoins To Institutions

As BTC saw institutional money being poured in, as described above, its price reacted with massive price increases. Ultimately, the cryptocurrency broke above $20,000 for the first time and neared $30,000 by the end of last year.

OKEx examined the “age of coins transactions on the Bitcoin blockchain” from September to December and concluded that the average age surged in late October.

As such, the company believes that long-term BTC HODLers, also known as “OG whales,” realized some profits when the asset headed into uncharted territory. Interestingly, OKEx argued that such investors sold their coins to institutions:

“Because we believe institutional investors were on the bidding side of the order books, we may infer that long-term BTC holders sold into institutional purchases.”

Furthermore, the research added that BTC miners also disposed of their coins, while institutions were piling up to take advantage with sizeable purchases.