Institutional Capital Remained Undaunted by Industry-wide Turmoil in Q1

The crypto space faced several setbacks in March, stretching from stablecoin stability concerns within the sector to a global banking crisis at the macro level. Nonetheless, investors showed belief in Bitcoin as a store of value amid the turbulence, which ultimately shaped an eventful month.

Notable price movements across the month

Bitcoin had singular good fortunes in the market, albeit in patches, across the month despite the dramatic sentiment shifts occasioned by regulatory and macro headwinds. Thriving on banking and inflationary uncertainties, the flagship crypto outperformed most Wall Street stocks. For context, Bitcoin registered a 23% price uptick in March, contributing 72% in quarterly returns for the just concluded Q1.

The BTC/USD pair soared past the $29,000 mark in one of its mini rallies, setting a monthly high of $29,160. However, it appeared to lose momentum towards the end of the month on the back of increased regulatory action on centralized exchanges. Though some alts, including Mask Network’s MASK, logged significantly larger monthly returns, Bitcoin still proved the most resilient asset in a heavily suppressed market.

The crypto Fear and Greed index, a measure of the market sentiment, reflected a neutral stand across the month while repeatedly bouncing above the 50 points mark. Bitcoin’s breakout above $25,000, in particular, pushed the index into the greed zone, where the index has since hovered. On-chain data suggests that large-volume traders buying back in were responsible for fueling the Bitcoin rallying.

Correlation and comparison with other asset classes

Markedly, the market embraced its volatile nature even with increased scrutiny from domestic and global regulators, occasionally flashing price breakout signs. Ether, the leading altcoins, registered 13.46% in gains across March and 52% overall in Q1, according to Coinglass data. Meanwhile, the S&P 500 and Nasdaq indexes tracked 7.46% and 17.67%, respectively, during this period. Gold, another haven asset benefiting from the chaotic macro landscape, also displayed upside volatility, returning 7.95% gains on its symbol.

 

Though Bitcoin appeared to have abandoned its tendency swings with tech stock – an observation that prevailed in 2022 – its price correlation to gold rose to a multi-month high in March. Blockchain analytics firm Kaiko observed on Apr 3 that Bitcoin’s correlation to gold grew to multi-month high levels in March, atypical of its debatable risk-off asset status perception.

March’s financial landscape proves constructive for ‘alternative’ assets.

Investors stayed on the edge of their seats throughout the quarter as Bitcoin tracked a decent course. A constantly-changing macro combined with the fears of contagion from the failure of Signature, Silvergate and Silicon Valley banks pushed some to explore Bitcoin and other crypto alternatives. Institutions and other groups navigated cautiously in the face of prevailing volatility. Even as analysts warn that the crisis is far from over, the majority of market participants appear to have become accustomed to the readjustments.

Industry experts also reckon that the anticipation of the crackdown also helped crypto investors remain at ease. Earlier in February, the US Securities and Exchange Commission (SEC) sent a Wells Notice to BUSD stablecoin issuer Paxos. This month, the Commodity Futures Trading Commission (CFTC) followed suit by alleging a string of claims against Binance and its founder CZ. The SEC also previously fined Kraken exchange for the unauthorized offering of unregistered securities and later reportedly sent a Wells Notice to Coinbase towards the end of the month. The markets regulator additionally proposed rule changes meant to limit the crypto operations of custodial firms.

Incidentally, liquidity issues befell crypto-friendly banks, necessitating intervention from the Federal Reserve and other banking authorities. In Europe, the banking crisis involved Credit Suisse, which UBS Group acquired for almost $2 billion. The package, which included a $100 billion provision in liquidity, came as part of efforts by Swiss authorities to prevent a similar outcome as in the US. Deutsche Bank also showed weakness before bolstering its financial position.

Observer’s reaction to the cocktail of influences

Bitcoin’s dominance over other options in its class, like Ether has been argued to be an influence of its first-mover advantage and perceived higher decentralization. Markets commentator Mike McGlone recently floated the latter justification.

“There’s so much disdain about regulators pushing back on the whole space, and that’s the key thing where Bitcoin sticks out. You can’t do anything to this, and you can’t kill it and it’s just unprecedented; it is untouchable,” he remarked in an April 3 podcast session he featured.

Its price buoyancy amid Q1’s negatively perceived developments inspired confidence among investors.

“The key thing I look at simplistically for Bitcoin is, if you’re a money manager, why take the risk of not having some of this revolutionary asset, particularly because it’s so controversial you want to have at least some in it because you don’t want to look like an idiot over history,” the commodity strategist opined.

Reasonably, institutional investors remain excited that macro conditions could become fair for a bull market.

Business headlines around institutional investors

MicroStrategy paid off a $205M Silvergate loan at a 22% discount and bought 6.5K Bitcoin

In the last week of March, Michael Saylor’s MicroStrategy revealed that the firm settled a Bitcoin-collateralized loan worth $205 million from Silvergate Bank under their Silvergate Exchange Network Leverage program. The agreement was due to mature on March 25, 2025, but providing the cash – $161 million to help expedite Silvergate’s bankruptcy proceedings saved the mobile software and cloud services firm 22% of what would have been the final amount.

The 8-K filing justified that the closure of the credit agreement also meant that Silvergate released its security interest in all of MicroStrategy’s assets (including Bitcoin) collateralized for the loan. MicroStrategy added that pursuant to a previous share-sale arrangement, it sold about 1,348,855 shares for $339 million. The revenue generated, coupled with some more cash, was used to settle the outstanding Silvergate debt. The business intelligence firm reported that it had bolstered its Bitcoin stash, investing $150 million to acquire 6,455 BTC for an average price of $23,238.

The purchase brought its holdings to a total of 138,955 Bitcoin accrued at an average of $29,817 per token to a total of $4.1 billion and also marked the first time the company has invested in Bitcoin this year. The last buy was worth a total of 2,395 Bitcoin bought at an average of $17,181 last December.  Bitcoin Treasuries data shows MicroStrategy is by far the largest corporate holder of the leading digital asset. Crypto miner Marathon Digital is coming second with more than ten times fewer holdings – 12,232 Bitcoin.

To learn more about Bitcoin, check out our Investing in Bitcoin guide.

ARK invested $12.6M in Coinbase stock following SEC Wells Notice

Cathie Wood’s premier investment fund ARK Invest continues mounting a striking show of confidence in Coinbase’s stock, with the company’s exchange-traded funds purchasing $12.6 million worth of shares on Mar 24. This followed a similar investment the previous day, shortly after Coinbase revealed it received the Wells Notice. As the news led to an immediate negative sentiment that caused a decline in the value of COIN stock, Ark took advantage and added 155,833 shares to its ARK Innovation EFT (ARKK) and 26,395 shares to ARK Next Generation Internet EFT (ARKW) at the end of the week, according to CoinDesk.

Coinbase stock scoop: A sale, then further investments

Ark Invest embarked on the streak barely 48 hours after selling $13.5M of the exchange’s stock from its ARK Fintech Innovation ETF. Notably, the Florida-based global asset manager has been all around Coinbase investments this year. The biggest was the simultaneous addition of 52,525 shares to its Next Generation Internet ETF and 301,437 shares of Coinbase to the ARK Innovation ETF (ARKK) for about $20.6 million earlier this month, on March 9.

Still last month, ARK Invest, for the first time this year, sold its Coinbase stock, in a clearance volume amounting to 160,887 COIN shares from its ARK Fintech Innovation ETF for about $13.5 million – 9% of all shares of the crypto exchange that it had bought in 2023. ARK’s sales followed a period of COIN shares accumulating value to reach a seven-month high of $84 in March.

Soon after, the stock headed downwards after Coinbase received a Wells Notice that the SEC would likely pursue it for its crypto product offerings. Cathie Wood’s Fund resumed its COIN buying spree with 230,599 shares added to its ARK Innovation ETF (ARKK) and 38,329 shares going to the ARK Next Generation Internet ETF (ARKW). The total additions were worth around $17.8 million as of the close of markets on the day.

$16M raise for the private ARK Crypto Revolutions Cayman Fund

Days after announcing its most significant investment yet in Coinbase, Ark Invest raised $16 million, a filing with the US Securities and Exchange Commission shows. The funds were steered towards a private crypto-focused investment fund, split into the ARK Crypto Revolutions Cayman Fund LLC and the ARK Crypto Revolutions U.S. Fund LLC.  At the time of filing, there were ten listed investors – with one individual contributing nearly $9 million to the Caymans Fund. Being that this fund is a private placement, it is only available to select friends, family, accredited investors, and institutional clients.

Cathie Wood on the Biden administration’s stance on crypto

Separately remarking on the potential impact of increased US government action against crypto, star stock picker Cathie Wood recently expressed her concerns. In a recent conversation with economist Arthur Laffer, the tech investor voiced that Biden Administration’s sudden clampdown on the crypto industry could impact the ballot. She denounced the administration’s approach as anti-crypto, adding that the over 50 million Americans who own digital assets are closely watching the attacks of the White House on the asset class.

Wood referenced White House’s recently released economic report that contained scathing criticisms towards crypto. She critiqued it as overtly hostile while affirming her view on the role of crypto in the economy. The Ark Invest chief also mooted a cause of concern, especially within the younger demographic, which could become a center of attention in the upcoming elections.

Further, the ARK Invest CEO said that the US Securities and Exchange Commission (SEC) sending a Wells Notice to Coinbase would, in the long run, help provide clarity on how US citizens can legally own and trade crypto assets. She pointed out that the exchange anticipated the move and braced for legal action. Wood predicted that the case could eventually land in the courts and ultimately be decided upon by Congress. In the meantime, however, this would be a topic of discourse leading up to the elections, she summed.

 

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