Time for Smart Money to Flow In, What Does it Mean for Bitcoin & The Overall Crypto Market

This week, the market is in green after the massive decline in prices that wiped out a trillion dollars from the market.

The recovery saw Bitcoin's price going to almost $40k, gaining more than $10k of its value in about five days. Ether has recovered strongly, rising 53% to trade as high as $2,750. However, the market remains choppy without giving a clear idea of where it is going. ETH -3.85% Ethereum / USD ETHUSD $ 3,388.84
Volume 14.02 b Change -$130.47 Open $3,388.84 Circulating 117.59 m Market Cap 398.48 b
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Altcoins that had been completely obliterated during this sell-off, losing 70% to 95% of their value, are also recorded gains between 50% to 100%.

Still, such a deep sell-off in a matter of a couple of weeks resembles the one seen during the 2018 bear market, but at that time, it lasted for several months.

With this total annihilation, over-leveraged traders have been cleared out of the market brutally after $8.60 billion liquidated on Black Wednesday, not including Binance’s numbers. The funding rate also continues to be in negative territory, while the highest is at 0.0104% on OKEx.

Besides levered traders, pump chasers and DeFi micro-cap hunters are also severely underwater while funds that bought around the top are hurting, which means this is time for smart money.

Highest Quality Wins

As we reported, several funds are reporting interest from big players, and on Monday, Ray Dalio, the co-founder, and CEO of the world’s largest hedge fund, also revealed that he owns some Bitcoin.

“This is the new money inflow season. And new money goes after the highest quality assets: bitcoin, ethereum, and defi blue chips,” said trader and economist Alex Kruger. “New smart money goes after the highest-quality assets. While underwater speculators sell rips. This creates a level-by-level traders market.”

This expected entry of sophisticated investors now has the market speculating what it would mean for the market. While some like DegenSpartan say much more liquidity and institutional participants in this rapidly maturing market means the dump won’t be as swift or as deep as previous cycles, others like Kruger believe nothing has changed.

Large BTC corrections and, by extension, in altcoins will continue happening because institutions won’t change things; exchanges are the only ones that can change things through much better access to fiat liquidity, said Kruger.

Is The Bull Market Intact?

Interest in the crypto space from institutions seems to be more towards Ether than Bitcoin. Just last week, Goldman Sachs said in its report that Ether beats BTC as a better store of value.

Additionally, Open interest on Bitcoin futures which fell more than 60% to a mere $11 billion on Sunday, has added $580 million on Monday. As for OI on Ether futures, it went to $5.17 billion after a 56% drop and is right now at $5.94 billion, adding $770 million.

This interest suggests that the bull market is intact, and while that needs to be seen to be confirmed, momentum is now very positive with new smart money inflows and crypto covering short hedges.

The macro-environment also continues to be in favor with the balance sheet of the Federal Reserve now approaching $8 trillion, a new high which has grown by over $1 trillion since July 2020, primarily driven by the central bank buying US treasuries & mortgage-backed securities.

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