According to a recent report published by Bybit, institutional traders‘ behaviors in the digital assets market have been changing throughout 2023. The report concludes that many traders have massively shifted their investments from altcoins towards Bitcoin.
The study, focuses on 3 different classes of traders: Institutional traders (INS), individual traders with a capital of $50,000 or more(VIP), and the rest of the traders (Retail Traders). It also divides the assets into 4 categories: Bitcoin, Ethereum, Stablecoins and altcoins…..Story continues…
By: Alex Lari
Source: Institutional Traders Heavily Favor Bitcoin Over Altcoins: Report | Bitcoin News
.
Critics:
ETF shares are created and redeemed when large broker dealers called authorized participants (AP) act as market makers and purchase and redeem ETF shares directly from the ETF issuer in large blocks, generally 50,000 shares, called creation units.
Purchases and redemptions of the creation units are generally in kind, with the AP contributing or receiving securities of the same type and proportion held by the ETF; the lists of ETF holdings are published online. The ability to purchase and redeem creation units gives ETFs an arbitrage mechanism intended to minimize the potential deviation between the market price and the net asset value of ETF shares.
APs provide market liquidity for the ETF shares and help ensure that their intraday market price approximates the net asset value of the underlying assets. Other investors, such as individuals using a retail broker, trade ETF shares on the secondary market.
If there is strong investor demand for an ETF, its share price will temporarily rise above its net asset value per share, giving arbitrageurs an incentive to purchase additional creation units from the ETF issuer and sell the component ETF shares in the open market. The additional supply of ETF shares reduces the market price per share, generally eliminating the premium over net asset value.
A similar process applies when there is weak demand for an ETF: its shares trade at a discount from their net asset value. When new shares of an ETF are created due to increased demand, this is referred to as “ETF inflows“. When ETF shares are converted into the component securities, this is referred to as “ETF outflows“.
ETFs are dependent on the efficacy of the arbitrage mechanism in order for their share price to track net asset value. Tokens, cryptocurrencies, and other digital assets other than Bitcoin are collectively known as alternative cryptocurrencies, typically shortened to “altcoins” or “alt coins”, or disparagingly “shitcoins”.
Paul Vigna of The Wall Street Journal also described altcoins as “alternative versions of Bitcoin”given its role as the model protocol for altcoin designers. Altcoins often have underlying differences when compared to Bitcoin. For example, Litecoin aims to process a block every 2.5 minutes, rather than Bitcoin’s 10 minutes, which allows Litecoin to confirm transactions faster than Bitcoin.
Another example is Ethereum, which has smart contract functionality that allows decentralized applications to be run on its blockchain. Ethereum was the most used blockchain in 2020, according to Bloomberg News. In 2016, it had the largest “following” of any altcoin, according to the New York Times.
Significant rallies across altcoin markets are often referred to as an “altseason”. Stablecoins are cryptocurrencies designed to maintain a stable level of purchasing power. Notably, these designs are not foolproof, as a number of stablecoins have crashed or lost their peg. For example, on 11 May 2022, Terra‘s stablecoin UST fell from $1 to 26 cents.
The subsequent failure of Terraform Labs resulted in the loss of nearly $40B invested in the Terra and Luna coins. In September 2022, South Korean prosecutors requested the issuance of an Interpol Red Notice against the company’s founder, Do Kwon. In Hong Kong, the expected regulatory framework for stablecoins in 2023/24 is being shaped and includes a few considerations.
As the first big Wall Street bank to embrace cryptocurrencies, Morgan Stanley announced on 17 March 2021 that they will be offering access to Bitcoin funds for their wealthy clients through three funds which enable Bitcoin ownership for investors with an aggressive risk tolerance. BNY Mellon on 11 February 2021 announced that it would begin offering cryptocurrency services to its clients.
On 20 April 2021, Venmo added support to its platform to enable customers to buy, hold and sell cryptocurrencies. In October 2021, financial services company Mastercard announced it is working with digital asset manager Bakkt on a platform that would allow any bank or merchant on the Mastercard network to offer cryptocurrency services.
There are also purely technical elements to consider. For example, technological advancement in cryptocurrencies such as Bitcoin result in high up-front costs to miners in the form of specialized hardware and software. Cryptocurrency transactions are normally irreversible after a number of blocks confirm the transaction.
Additionally, cryptocurrency private keys can be permanently lost from local storage due to malware, data loss or the destruction of the physical media. This precludes the cryptocurrency from being spent, resulting in its effective removal from the markets. In 2018, an increase in crypto-related suicides was noticed after the cryptocurrency market crashed in August.
The situation was particularly critical in Korea as crypto traders were on “suicide watch”. A cryptocurrency forum on Reddit even started providing suicide prevention support to affected investors. The May 2022 collapse of the Luna currency operated by Terra also led to reports of suicidal investors in crypto-related subreddits.
Leave a Reply