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Bitcoin Institutional investment OKEx Insights Partners

BTC’s retail interest outpaced institutions in Q1 2021, but did it move the market?

2021.04.17 Matthew Lam

OKEx Insights once again joins forces with Catallact to examine Bitcoin's on-chain data from Q1 2021 and explore retail involvement in the market.

Written by OKEx Insights | Powered by Catallact 

In March 2021, data compiled by JPMorgan Chase suggested that participation from retail crypto traders gained steam against institutions — at least, in terms of BTC flows. The Wall Street giant used Square and PayPal data as a proxy and concluded that retail investors had purchased over 187,000 coins in Q1 2021. This is slightly more than the 172,648 coins purchased by institutions, as per data from fund flows, CME Bitcoin futures positions and company announcements.

With the first quarter of 2021 now behind us, OKEx Insights has once again used on-chain data from Catallact to delve deeper into retail traders' and institutions' roles in the BTC bull market. 

Did the retail sector really emerge as a driving force in the current BTC run? Here's what we found out.

A note on how we interpret on-chain data

This report is research-based, but on-chain data cannot tell us everything. As such, analysts must always exercise caution when drawing conclusions — and a certain amount of speculation must exist in order for those conclusions to be drawn.

For example, while our goal is to examine the level of retail involvement in driving the BTC bull run, we cannot use large on-chain BTC transactions to cleanly differentiate between purchases and sales. We also cannot remove aggregated transactions from major cryptocurrency exchanges, just like we cannot always note which movements are from institutions or hedge funds. Despite this, we are still able to make careful observations and present hypothetical conclusions.


To read OKEx Insights' previous research with Catallact — which covers the fourth quarter of 2020 — follow this link.


Retail BTC addresses increased steadily in Q1 2021

To begin, let's first take a look at the number of BTC addresses, bucketed by balance. 

For addresses with a balance of over 1,000 BTC, we may firmly classify them as falling outside the range of retail investors and traders. In doing so, we see two changes in Q1 2021:

  1. BTC addresses with small balances grew rapidly in Q1 2021. In particular, addresses holding 0.0001 BTC to 0.001 BTC surged by more than 300%.
  2. The number of addresses holding over 1,000 BTC fell slightly.

From this on-chain data, we may conclude that the BTC bull run in Q4 2020 attracted a huge influx of retail investors to the market in Q1 2021 — which may likely continue in the next quarter.

BTC addresses with small balances rose steadily in Q1 2021. Source: Catallact
BTC addresses with small balances rose steadily in Q1 2021. Source: Catallact

Additionally, the value distribution of BTC across different address buckets reflected the entrance of retail traders. 

If we look at this metric over a three-year span, the value in addresses with a balance over 10,000 BTC has fallen by 500,000 BTC. Meanwhile, addresses with 100–1,000 BTC and 1–10 BTC have increased by 1.7 million BTC and 500,000 BTC, respectively, since July 2017.

The value of large BTC addresses fell relative to small addresses in Q1 2021. Source: Catallact
The value of large BTC addresses fell relative to small addresses in Q1 2021. Source: Catallact

Apart from the rising number of smaller BTC addresses, the surge in BTC derivatives trading and social media engagement indicates the emergence of retail traders in the BTC market. For instance, open interest on BTC futures across cryptocurrency exchanges surged from $9.4 billion to $22.58 billion in Q1. Additionally, daily Bitcoin-related tweets doubled in this quarter and the subreddit r/Bitcoin added 1 million new subscribers.

Retail transactions failed to see notable growth

While BTC addresses for retail traders increased steadily in the first quarter, it is worth examining whether these addresses had a larger share of the total overall value of BTC transactions. 

If we look at the BTC daily amount bucketed by transaction ranges of 0.1–1 BTC and 1–10 BTC, we notice the following:

  1. Compared to Q4 2020, the daily amount of transacted BTC ranging from 0.1–1 BTC and 1–10 BTC decreased slightly in Q1 2021.

We may conclude that, despite the growth of small BTC addresses, retail traders had a limited contribution to the overall BTC transaction pool in Q1 2021.

Smaller BTC transactions dropped in value in the first quarter of 2021. Source: Catallact
Smaller BTC transactions dropped in value in the first quarter of 2021. Source: Catallact

Large BTC transactions dropped modestly in Q1 2021

If we also look at the number of BTC transactions ranging between 1,000–10,000 BTC — which we may define as institutions or whales — two findings, in particular, stand out:

  1. For transaction sizes between 1,000–10,000 BTC, the number of transactions saw a modest drop in Q1 2021.
  2. More than 400 transactions between 1,000–10,000 BTC took place on Feb. 9, representing an outlier.

We may conclude that the number of BTC transactions from institutions and whales has not seen notable growth in the first quarter of 2021. As for the outlier on Feb. 9, data from Catallact shows that cryptocurrency exchange Poloniex accounted for 76% of the transaction spike, though the reasons behind this are currently unknown. 

Transactions ranging between 1,000–10,000 BTC dropped when compared to previous quarters. Source: Catallact
Transactions ranging between 1,000–10,000 BTC dropped when compared to previous quarters. Source: Catallact

Professional custodians saw increased demand

The number of Pay-to-Multisig transactions is another metric that may be used to assess the cryptocurrency trading activities from both retail and institutions. P2MS is a Bitcoin script type allowing users to store BTC to multiple public keys, meaning that BTC withdrawals require signatures for some or all of the public keys. 

P2MS transactions typically represent those made by professional crypto custodians, who safeguard customers' funds. These customers tend to be cryptocurrency exchanges, corporations looking to keep treasury reserves safe, etc.

When we track the P2MS spending of BTC over time, we may observe the following:

  1. The amount of P2MS spending remained stable in Q1 2021.
  2. P2MS accounted for 13% of total BTC spending.

A conclusion we may infer from this chart is that the demand for professional custody remained stable.

The P2MS spending in BTC indicates solid demand for professional cryptocurrency custodians. Source: Catallact
The P2MS spending in BTC indicates solid demand for professional cryptocurrency custodians. Source: Catallact

Conclusion: Institutions remained key market players, despite increased retail interest

Compared to Q4 2020, the on-chain data from Catallact infers that retail interest grew in Q1 2021. Retail traders — usually categorized as addresses with small balances — grew steadily in this quarter, whereas the number of large addresses dipped slightly. While retail traders currently do not account for a large portion of BTC transaction value, the surging open interest of BTC derivatives likely affects short-term market movements.


OKEx Insights presents market analyses, in-depth features and curated news from crypto professionals.

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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

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