This week witnessed significant turbulence in the cryptocurrency markets, with Bitcoin and Ethereum leading the charge in a sudden decline. The sharp downturn erased approximately $367 billion in market value, impacting the broader crypto landscape.
As Bitcoin’s value plummeted, the entire crypto market felt the ripple effects, coinciding with a downturn in the Japanese markets. Despite the intense sell-off at the beginning of the week, institutional investors took a strategic approach, seizing the opportunity to buy the dip rather than react impulsively.
Spot ETF inflows show institutional interest
Spot Ethereum exchange-traded funds (ETFs) experienced substantial inflows early in the week, with approximately $120 million pumped in by traders on Monday and Tuesday. This surge in investment came as Ether’s value was down 42% from its March peak, presenting a lucrative opportunity for institutional players. These investors quickly moved to capitalize on the lower prices, reinforcing their interest in the cryptocurrency market.
In contrast, the situation for Bitcoin ETFs was initially different. Net flows for spot Bitcoin ETFs were negative at the start of the week, raising concerns among some market participants. However, by midweek, the tide had turned. According to data from Coinglass, demand for Bitcoin ETFs surged, with funds adding over $245 million between Wednesday and Thursday. This shift in momentum provided Bitcoin with the necessary support to begin its recovery.
Morgan Stanley’s strategic move boosts Bitcoin
The surge in institutional investment was further bolstered by Morgan Stanley’s strategic decision to actively promote Bitcoin funds issued by BlackRock and Fidelity. The firm authorized its 15,000 financial advisors to encourage clients with significant net worth—over $1.5 million—to invest in these Bitcoin funds. Previously, wealth management firms only engaged in crypto investments upon client request. However, Morgan Stanley’s proactive approach marks a significant shift in the industry’s stance on cryptocurrencies.
In their May 13F filing, Morgan Stanley disclosed that they held approximately $270 million in spot Bitcoin ETFs, a small portion of their $1.5 trillion in assets under management. This move by a major Wall Street bank is expected to influence other big players, potentially leading them to follow suit and increase their exposure to cryptocurrencies.
Crypto market rebounds
By the end of the week, the cryptocurrency market showed signs of recovery. The overall market cap regained hundreds of billions of dollars, comfortably surpassing $2.1 trillion. Bitcoin reached an intraday high of nearly $63,000 on Friday, while Ether traded above $2,700 earlier in the day. The liquidation of more than $100 million in short bets on Bitcoin over the past 24 hours further contributed to Bitcoin’s upward momentum.
Despite these gains, both Bitcoin and Ether remain below their highs from earlier in the year. Ether, in particular, is on track for its worst week in nearly two years. However, the influx of institutional investment has played a crucial role in stabilizing the market and supporting the ongoing recovery.
The developments this week underscore the growing involvement of institutional investors in the cryptocurrency market, signaling their confidence in the long-term potential of assets like Bitcoin and Ethereum. As the market continues to evolve, their influence is likely to shape the future trajectory of these digital currencies.