Bitcoin Price Stagnant Despite 53% Drop in Institutional Demand

Over the past month, numerous institutions have been aggressively acquiring Bitcoin (BTC), yet this surge in demand has not translated into significant price movements for the leading digital asset. This discrepancy has raised concerns among market participants, who are seeking to understand the underlying reasons for the stagnant price despite the increased institutional interest.

According to a recent report by a market intelligence firm, the weak price momentum can be attributed to the insufficient institutional demand. The report revealed that purchases from U.S.-based exchange-traded funds (ETFs) and corporate treasuries have declined this year compared to the period from November to December 2024. ETF purchases have decreased from 86,000 BTC in early December to 71,000 BTC in mid-May, and are currently at 40,000 BTC, representing a 53% decline over this period. Similarly, acquisitions by firms like Strategy have dropped from 171,000 BTC in December to 16,000 BTC currently, showing a 90% plunge.

While institutional purchases and ETF flows have helped maintain BTC above $100,000, further declines in these areas could slow price gains. This is exacerbated by the fact that ETF and institutional buys represent only a fraction of the overall BTC demand, which seems to be contracting. At the market’s peak in December, ETF and institutional purchases represented 33% of total Bitcoin demand growth, purchasing no more than 257,000 BTC out of the total 771,000 BTC. This indicated that the Bitcoin market had a bigger and unobservable demand coming from other sources.

Currently, the overall demand for BTC is contracting, having declined by 895,000 BTC over the last 30 days. This metric needs to expand for a sustainable price rally to occur. However, the demand level from institutions right now is not enough to trigger that expansion. The annual growth chart reflects how ETF and institutional purchases account for only a portion of demand. Apparent demand has also contracted by 857,000 BTC, significantly offsetting the expansion of ETF and institutional demand (377,000 BTC and 371,000 BTC, respectively).

One possible explanation for the price stagnation is the changing dynamics of Bitcoin's supply. Institutions are increasingly acquiring Bitcoin through new investment vehicles, which has led to a significant reduction in the available supply of the cryptocurrency. This hoarding by institutions has left a dwindling fraction of coins in circulation, which could be contributing to the price stagnation. As more institutions pile up Bitcoin, the supply becomes tighter, potentially leading to a future price surge once the demand outstrips the limited supply.

Another factor to consider is the historical patterns of Bitcoin's price movements. According to analysts, Bitcoin tends to experience significant price increases during its quadrennial bull runs, which are driven by factors such as ETF inflows and institutional investment. However, the current price stagnation suggests that these historical patterns may not be playing out as expected this time around. It is possible that the market is still digesting the recent influx of institutional capital, and that a price surge could be on the horizon as the market adjusts to the new dynamics.

The recent failure of Bitcoin to break through the $110,000 mark despite strong U.S. jobs data also highlights the challenges facing the cryptocurrency. While some analysts had predicted that Bitcoin would reach $250,000 or higher, driven by ETF inflows and historical patterns, the reality has been more nuanced. The price stagnation could be a result of various factors, including regulatory uncertainty, market sentiment, and the overall economic environment.

In conclusion, the current situation where institutions are piling up Bitcoin but the price is not going up presents a complex picture. The changing supply dynamics, historical price patterns, and market sentiment all play a role in shaping the cryptocurrency's price movements. As the market continues to evolve, it will be interesting to see how these factors interact and whether the price of Bitcoin will eventually reflect the increasing institutional interest.