Analyst: 85% of the rally was driven by U.S. institutional investors

Cryptocurrency prices have remained relatively stable over the past 24 hours. As of press time, Bitcoin is above $23,000, up 0.46% in 24 hours. Since its low of $15,476 in November last year, Bitcoin has rebounded by more than 53%. Analysts believe that institutional investors have contributed a lot to this rise. According to a report released by financial services company Matrixport on January 27, recent data shows that as much as 85% of Bitcoin's gains were driven by US institutional investors.

Unlike stocks, crypto markets trade 24 hours a day, allowing observers to track order flow across different time zones and infer where buying and selling pressures are coming from. Matrixport’s “Matrix on Target” report has long argued that the Asian session is driven by retail investors, while the U.S. session is driven by institutional investors. Analysts believe that if an asset that trades 24 hours a day performs well during the U.S. trading session, this should indicate that U.S. institutions are buying it, while if it performs well during the Asian trading session, it means that Asian retail investors are buying it.

Bitcoin has risen 40% year-to-date, with 35% of the returns occurring during U.S. trading hours, which analysts believe means "85% of the contribution" is related to U.S. investors, indicating that U.S. institutions are currently the main buyers of Bitcoin.

The report concluded that this “should be a very positive sign for Bitcoin” as institutional adoption continues.

Markus Thielen, head of research and strategy at Matrixport, believes this evidence shows that institutions have not “abandoned cryptocurrencies” and suggests we may be entering a new “crypto bull market.”

Thielen added that previous data shows that institutions often start buying Bitcoin first before investing in other cryptocurrencies. He noted: “If history is a guide, then we should see Layer 1 and altcoins outperform relative to Bitcoin.”

He also mentioned that Ethereum seems to be performing well during the U.S. session, indicating “institutional inflows” into crypto, while “Aptos Token could rally further as Korean retail traders start to lead the way.”

Institutional bullish sentiment is also evident from the new premium on Bitcoin futures listed on the Chicago Mercantile Exchange (CME).

Thielen noted: “Institutions are not only buying Bitcoin spot; we are also seeing persistently high premiums on perpetual futures. We interpret this as a sign that institutional traders and hedge funds are accelerating their buying.”

Deutsche Digital Assets made a similar observation earlier this month, alerting investors to the rise in Coinbase’s premium as evidence of increased buying interest from sophisticated U.S. investors relative to retail investors.

“Traditional and crypto-focused hedge funds, corporates and traditional asset managers have been buying,” David Guong, head of research at Coinbase Institutional, wrote in his weekly market review published this week.

Technical indicators show mild oversold

From a technical perspective, Bitcoin's relative strength index (RSI) indicator currently shows 81.9, and Joel Kruger, market strategist at cryptocurrency exchange LMAX Digital , believes that BTC's price is currently in a mild overbought state (above 70 indicates that the asset is overbought). Based on the August peak, Kruger believes that BTC's next important resistance level is around $25,200, but does not rule out the possibility of "BTC falling $10,000 in the first half of this year" or "seeing its rebound above $50,000 in the second half of this year."

Data from Coinglass shows that as of Friday, BTC's funding rate is currently around 0.01%, indicating that market sentiment among traders tends to be bullish, but still far below the 0.06% level recorded in February or November 2021.

“Current derivatives levels suggest that the market is optimistic but not overheated, which could create the case for a sustained rally,” said Lucas Outumuro, head of research at cryptocurrency data and analytics firm IntoTheBlock .

Fed signals affect the market

Crypto markets rose slightly after the latest U.S. personal consumption expenditures (PCE) report on Friday showed a slowdown in inflation. Looking ahead to next week, the market is closely watching the Federal Open Market Committee (FOMC) interest rate decision and any hints on when policymakers might abandon rate hikes.

“Bitcoin should remain sideways ahead of the FOMC decision, with downside risks if the Fed sticks to its hawkish rhetoric,” Edward Moya, senior market analyst at Oanda, said in a note on Friday.