The world's biggest cryptocurrency can't seem to catch a break. It finally looked to be regaining strength this month, breaching $25,000 for the first time since its June collapse, only to relapse towards $20,000.
A deflating end to August has forced the market to confront the Big Bitcoin Question: where will a real rally come from?
Right now, doughty retail investors are looking like the most likely source of relief, as institutional players get cold feet in the midst of a macro maelstrom.
The amount of "illiquid bitcoin" across the market - held by wallets that rarely spend or sell - has risen by 73,840 bitcoin over the past week, the largest weekly increase for more than two months, according to Chainalysis data. That equates to roughly $1.7 billion at recent prices.
Furthermore, the amount of bitcoin held for over a year has increased by 54,300 on average in the last four weeks, the largest rise in about four months, Chainalysis said. Meanwhile, cryptocurrency exchanges have seen net outflows for three straight months as investors pulled their tokens into "cold storage" rather than selling, according to Arcane Research.
"It's clear that longer-term holders at the retail level are also accumulating, the number of wallets holding relatively small amounts of bitcoin is indeed growing," said Jay Fraser, head of strategy at BSTX securities exchange.
"Don't underestimate the impact of the retail HODLers," Fraser added, referring to a cohort whose name emerged years ago from a trader misspelling "hold" on an online forum. "Their lack of selling helps to create more scarcity so that, eventually, a supply shock for bitcoin will again play out."
INSTITUTIONS 'DROVE MARKET DOWN'
So what about those deep-pocketed institutional players that jumped on the crypto bandwagon when prices were high?
They have been selling hard, according to some market participants who say these big investors have been the primary driver of the crypto slump over recent months.
In the week to Aug. 19 - the week that saw bitcoin slide anew - the digital asset investment products favored by traditional institutional finance players saw outflows of around $9 million according to Coinshares data.
"The latecomers - institutions that came in close to the highs or the $30,000 to $50,000 levels - they're the ones that drove the market down, mostly," said Ed Hindi, chief investment officer at Tyr Capital Partners.
Hindi pointed to a steep discount between futures contract prices and the bitcoin spot price on the CME exchange as further evidence of institutional bearishness.
The discount for the most traded contract hit an all-time low of 3.36% last week, Arcane Research analysts said.
'READY TO BUY THE DIP'
But don't count institutional players out - there's plenty of evidence they haven't given up on bitcoin, which is down a whopping 70% since its all-time high of $69,000 touched in November, and has lost 56% since the start of 2022.
Some market watchers point to the decision of BlackRock, the world's largest asset manager, to launch a private bitcoin investment product specifically for institutional investors as a strong sign that demand remains strong and could drag crypto out of the doldrums.
Andy Edstrom, managing director of Swan Advisor Services, said his firm had continued to see interest from financial advisors and their clients in bitcoin investments despite some "fair weather interest" going away.
"Some advisors are ready to buy the dip, they're telling us 'I've got dry powder to invest in $20,000 bitcoin'," he added.