Bitcoin’s price broke above the February 2023 highs of $25,200 after U.S. inflation data was in consensus with the market expectation. The potential fallout of the global banking system further promoted Bitcoin investment as a non-correlated global hedging instrument similar to gold in March. The correlation between gold and Bitcoin (BTC) has been rising since the start of the month.

imageCorrelation coefficient between BTC and gold. Source: TradingView

However, institutions have become net sellers of Bitcoin in 2023, which raises some red flags. Bitcoin whales — wallets holding between 10 BTC and 10,000 BTC — have not participated in the current rally. It appears that retail investors are mainly driving the uptrend. The divergence between whale and retail investment could cause a short-term pullback in Bitcoin prices.

Institutions are forced BTC sellers, says analyst

Institutional crypto asset flows data from CoinShares reveals the largest two-week sell-off from investment funds since March 6. The outflows have erased the positive inflows for this year, with the net year-to-date flow equalling negative $177 million.

CoinShares’ data tracks the portfolio of global institutional funds with digital asset exposure, including Grayscale, CoinShares XBT, 21Shares, Purpose and 3iQ.

James Butterfill, CoinShares’ head of research, notes in the report that the flows “may be driven, in part, by the need for liquidity during this banking crisis, a similar situation was seen when the COVID panic first hit the market in March 2020.”

imageInstitutional flow of crypto assets. Source: CoinShares

Butterfill’s theory about forced sell-offs by institutions may have some credibility, as on-chain analytics firm Santiment informed Cointelegraph that it “do[es] not currently see major whale sell-offs at this time. Bitcoin addresses holding 10-10,000 BTC have remained essentially flat.”

It is encouraging that whales are not looking to sell the current rally. However, as the prices continue to rise, the asset will require whale buyers to join the bandwagon — otherwise, the rally could fade soon.

Additionally, the recent depegging of USD Coin (USDC) and the regulatory crackdown on Binance USD (BUSD) have likely caused a minor whale exodus from stablecoins. Santiment reported that “addresses holding between $100,000 to $10 million in stablecoins have been dropping slightly, but not to a notably high degree.”

A flow of stablecoins to Bitcoin and other cryptocurrencies is positive for prices. However, large-scale conversions from stablecoins to dollars weaken the market’s buying power. The lack of growth in whale BTC holdings suggests that the flows represent more of the latter situation.

imageWhale holdings of BTC and stablecoins. Source: Santiment

Another crucial stakeholder in the Bitcoin economy is BTC miners. The BTC holdings in one-hop miner addresses — BTC accounts that receive coins from mining pools — have increased steadily since the start of 2023.

Some miners booked some profit on March 14 when Bitcoin’s price broke above $25,000 for the first time and again a week later when it touched $28,000. However, the total holdings are still in an uptrend since the start of 2023.

imageHoldings on one-hop miner addresses. Source: Coin Metrics

Retail investors on spot exchanges are driving prices

So far, spot purchases by retail investors are likely driving the rally. Will Clemente, an independent on-chain analyst and the co-founder of Reflexivity Research, tweeted that the uptrend “appears to be mostly spot driven” with muted open interest volumes for BTC futures contracts and funding rates on perpetual contracts.

The holdings of Bitcoin addresses with less than 10 BTC continue to surge to new all-time highs. The distribution among small hands adds credibility to the “arguments against Bitcoin regarding supply concentration” among a few large holders.

Related: Holding Bitcoin: A profitable affair 88.5% of days

However, retail investors have a poor track record in timing market entries and exits. Thus, the participation of whale investors is crucial for confidence in the present rally.

Technically, the BTC/USD pair appears strong on a daily time frame, with a positive breakout and consolidation above its broadening wedge pattern. Currently, buyers are facing resistance from the June 2022 breakdown levels between $28,000 and $30,000.

imageBTC/USD daily price chart. Source: TradingView

On the other hand, the CME futures data raises the chance of a pullback with two unfilled gaps toward $26,500 and $19,500. A price gap on CME futures charts is formed during U.S. holidays and weekends when the spot trading of Bitcoin on exchanges creates a difference between the closing and opening price on CME.

Usually, CME gaps are filled by a price action toward the closing price on CME to retrace the pump on the futures market. Veteran trader Peter Brandt advised opening a short BTC position based on the gap.

There’s a chance that more sophisticated investors are waiting for the U.S. Federal Reserve policy rate meeting on March 22 before opening their swing positions. The Fed’s policy rate announcement will likely act as a strong market mover, inducing significant volatility in the market.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.