The current cryptocurrency market feels a bit strange. Institutions and retail investors seem to be living in different worlds, with completely opposite perceptions of the market.
Institutional investors have a very optimistic view of cryptocurrencies. Since the beginning of this year, institutions have been buying, buying, buying. Various ETFs and companies have accumulated around 104,000 Bitcoins, while only about 18,000 new Bitcoins were “minted” by the Bitcoin network this year.
Retail investors, on the other hand, are immersed in a sense of disappointment. Matt Hougan, CIO of Bitwise, said that according to the latest crypto sentiment index, retail investor sentiment is at a near-historic low.
Despite Bitcoin rising nearly 5% since the start of the year, other cryptocurrencies have underperformed. Except for XRP, Solana, and BNB, many altcoins, including ETH, have negative returns (see the chart below). It’s not surprising, then, that retail sentiment is low.
However, Matt Hougan believes the altcoin spring is coming. This might not just be a comforting statement, but it could be true. Still, I think retail investors have an even better strategy to choose. That is, following the strategy and learning from institutional investors.
In fact, the following strategy is becoming the choice of more institutions. According to JPMorgan’s latest survey, the percentage of institutional traders who “do not plan” to participate in cryptocurrency trading has decreased from 78% last year to 71%. In other words, there is a possibility that 7% more institutional traders will begin trading crypto in 2025. In other words, 29% of institutional traders may be involved in cryptocurrency trading this year.
So, what are the institutions that have already started trading crypto doing?
The question is, with so many institutions, who should we learn from? However, you should also know that there are high-level institutional-like retail investors and low-level retail-like institutions. For example, recently, retail-like institutions have started selling Bitcoin ETFs, with net outflows for four consecutive days, totaling over $500 million (see the chart below).
But don’t worry, the departure of retail-like institutions hasn’t had much of an impact on the market. Large institutions have been using the opportunity created by Bitcoin’s price decline to reduce their positions (see the chart below).
According to IntoTheBlock, on February 5th, when Bitcoin’s trading price fell below $97,600, large institutions (whales) bought more than 39,620 BTC in a single day, worth over $3.79 billion.
I think we should learn from these institutions — buy when others are fearful. For example, Goldman Sachs is a good role model to follow.
Goldman Sachs, as a global leading investment bank, has demonstrated extraordinary insight in reverse investing throughout its history, especially during financial crises. During the 2008 financial crisis, Goldman Sachs made significant profits by purchasing undervalued assets during market panic, thanks to its accurate market judgment and asset allocation. Its keen insight and firm belief enabled it to recover quickly after the crisis and achieve significant growth.
In addition, Goldman Sachs has had successful investments in multiple emerging markets, such as its early bullish stance on China’s economic rise, which brought substantial returns. In the cryptocurrency field, Goldman Sachs has also made early moves, launching cryptocurrency investment products and capturing the growth potential of Bitcoin and other emerging assets.
Goldman Sachs’ investment philosophy emphasizes a long-term perspective and market cycle judgment, firmly believing in reverse investing strategies. Buying when the market is low and selling when it’s overheated has helped it navigate multiple market fluctuations steadily. Therefore, retail investors can emulate Goldman Sachs’ strategies, especially in times of market gloom, by daring to enter and seize investment opportunities, gradually achieving capital appreciation.
Last year’s fourth quarter, Goldman Sachs accelerated its cryptocurrency investments, and calling it a shopping spree is not an exaggeration.
In the fourth quarter of 2024, Goldman Sachs significantly increased its holdings in Bitcoin ETFs. Specifically, its holdings in BlackRock’s iShares Bitcoin Trust (IBIT) grew from $600 million in the previous quarter to over $1.5 billion, an increase of 177%.
Goldman Sachs’ investment in Ethereum ETFs soared from $22 million in the previous quarter to $476 million, an increase of 2000%. This remarkable increase shows Goldman Sachs’ strong confidence in Ethereum’s future growth potential. Specifically, Goldman Sachs purchased shares in BlackRock’s iShares Ethereum Trust (ETHA) and Fidelity’s Ethereum Fund (FETH), with about half of the funds invested in these two ETFs.
To summarize, Goldman Sachs has invested nearly $2 billion in cryptocurrency ETFs, with a ratio of 3:1 between Bitcoin and Ethereum. You should be able to follow this example, of course, if you have an advantage, you can directly buy the spot market.
In conclusion, Goldman Sachs’ investment strategy fully embodies the wisdom of reverse investing. Through accurate market judgment and bold positioning, it has performed exceptionally in the cryptocurrency field. For retail investors, emulating Goldman Sachs’ approach, especially by daring to enter during market downturns, not only helps seize investment opportunities but also allows for substantial returns during future market recoveries. Instead of following the crowd, it’s better to leverage the successful experience of institutions and adopt a more forward-thinking investment strategy to steadily build wealth.
