Bitcoin ETFs and OGs Offload $1B Each - Should You Sell Too?
Institutional Crypto Research Written by Experts
👇1-15) The 4-year predictable, parabolic cycle pattern, which forms the basis of 95% of crypto forecasts, is a significant factor in Bitcoin's price projections. This pattern, often extrapolated, suggests that Bitcoin's value will continue to rise indefinitely. The stock-to-flow model, another key tool, factors in the diminishing supply to project an infinite value. This year, as in the past, most experts anticipate Bitcoin to reach new heights, with predictions ranging from 100,000 to 150,000 or even higher.
👇2-15) Technological innovation and human psychology, particularly the interplay of greed and fear, are pivotal catalysts in the cyclical cryptocurrency market. Despite this, the market fundamentally operates as a momentum game, with most participants actively driving prices higher and maintaining a consistently bullish stance. This self-fulfilling prophecy underscores the necessity to seize upside momentum when opportunities arise assertively. This also elucidates the likelihood of many more cycles in the future.
👇3-15) Bitcoin's utility value and its valuation on a cash flow basis should be addressed in discussions; unlike other assets, it is similar to Gold, which is valued based on a production cost curve. Over time, the psychological aspect of purchasing Bitcoin has become more complex, as the high price of one coin (70,000) is less appealing than the affordability of a billion coins for 100 dollars. Meme coins exploit this psychology, while companies use stock splits for the same reason.
Bitcoin (purple) vs. our money flow indicator (purple)
👇4-15) Although the market structure was not outright bullish, we tried to position ourselves for a breakout three weeks ago when Bitcoin approached 70,000 again, as reclaiming a previous all-time high has often resulted in a parabolic move higher. When breakouts fail, risk management becomes critical. We expected a lower inflation number as the catalyst, which came in lower. Instead, Bitcoin sold off.
👇5-15) Contrary to previous changes in inflation, when Bitcoin ETFs became aggressive buyers, they sold $-1bn during the last eight sessions. Bitcoin miner over-the-counter selling has increased to its largest daily volume since March, with more than 3,200 BTC sold in one day. The publicly listed miners account for 3% of the market share but have net sold 8,000 BTC in May (June is not yet available, but miner selling has increased considerably). Miner reserves have declined from $129bn (June 5) to $118bn. The third identifiable seller is Old Whales, which sells for $1.2 billion. All three seem content to sell above 70,000.
👇6-15) We estimate that the average Bitcoin ETF entry price is 60,000 to 61,000, and re-testing this level could result in a wave of liquidations. When Bitcoin dipped to 56,500 on May 2, Blackrock claimed ‘sovereign wealth and pension funds’ were coming. This helped arrest the decline, but now Blackrock says that 80% of their Bitcoin IBIT ETF buying is from retail, not institutions. Calling for a ‘slow adoption journey’.
👇7-15) This 61,000 level coincides with the 21-week moving average, which has, in previous cycles, been an excellent risk-management indicator of when to buy (Bitcoin above the 21-week moving average) or when to sell. We estimate that 30% of the $14.5bn BTC ETF buying has been from arbitrage-seeking hedge funds, and the surprising ETF liquidations of the last eight sessions might indicate that these funds are not rolling their arb (long ETF vs. short CME futures) as the futures expiry approaches (June 28) and the arb has disappeared.
Bitcoin (white) vs. its 21-week moving average (purple)
👇8-15) The arbitrage exists because of high interest rates, which allows exchanges to market futures at a premium, and as most crypto traders tend to be bullish (buyers), which drives up the funding cost. The average annualized Bitcoin funding rate has been +16% in 2024 vs. 8-9% during the last few days. This single-digit funding rate might not keep the arbitrage game going, hence the BTC ETF selling. This is the flip side of the arb signaling effect we explained on March 8 (and turned cautious for the first time since BTC was at $40,000) and on April 5.
👇9-15) Our market structure analysis dissects the flow components and has sometimes provided opposing, cautious viewpoints despite a potentially bullish (parabolic) narrative. Indeed, Bitcoin has moved in a wide 15% range for over three months despite ETF inflows slowing materially down since March 12 (when CPI rapidly increased), and altcoin trading volumes collapsed, along with the funding rate.
👇10-15) Since April 21 (shortly after the Bitcoin halving), stablecoin minting has slowed dramatically. Those factors (ETF inflow and stablecoin minting pausing, altcoin, and funding rate collapse) caused us to worry about the 52,000-55,000 downside risk, narrowly missed by just -3% (low 56,500).
👇11-15) The lower CPI print on May 15 was followed by a massive $3.8bn of ETF buying over the next 20 days. As long as growth holds up, we expect a rally following lower CPI data, and we project sub-3.0% CPI prints later this year. When the Fed cut in July 2019 due to lower inflation and weaker growth after nine months on pause, Bitcoin fell 30%; hence, the reason for interest rate cuts is essential.
👇12-15) However, with the arb (funding rate) less attractive, the ETF buying is not materializing this time. When the SEC indicated that ETH ETFs could be approved on May 20, the market structure improved with increased futures positioning. Within three weeks, traders added $4.4bn in Ethereum futures positions (+50%) and $3bn in Bitcoin futures. Combined with the post-May 15 CPI data, this improved the market structure and caused Bitcoin to rally back to 70,000, where OG wallets, miners, and ETFs eventually became aggressive sellers.
👇13-15) Trading is always a risk/reward game, and the over-positioning in ETH futures was a risk we pointed out (June 3) in case Bitcoin failed to reach an all-time high in June. Leveraged futures traders have been the main, if not only, buyers since the May 23 SEC approval (19b-4 with S-1 still outstanding). Their flows pushed Bitcoin back to the top of the range, and with a lower CPI, risk/reward favored a Bitcoin breakout.
👇14-15) Lower inflation, the US election, and the stock market rally are non-crypto catalysts supporting higher Bitcoin prices later this year. But without additional stablecoin minting, ETF inflows, an increase in futures leverage, or other liquidity (market structure) indicators, Bitcoin bulls might miss out. Every time a breakout attempt fails or Bitcoin trades back below the previous cycle’s all-time high (68,300 ‘line-in-the-sand’), we need to define a level at which we should risk-manage positions. The 21-week moving average at 61,000 has protected the more significant drawdown in previous cycles.
👇15-15) Another level is 65,000, the mid-range of this 3-month consolidation period, which could indicate a more significant cycle topping formation. We do not blindly follow baseless narratives; we follow the data, and a lack of inflow from identifiable players (OGs, ETFs, miners, stablecoin issuers, etc.) causes concern. Everybody needs to define their risk tolerance. The combination of risk management and data analysis keeps traders in the game. Fifteen years ago, an experienced trader told us, ‘the market opens every day’ - meaning there is always another opportunity, another cycle.
Bitcoin (white) vs. its monthly stochastics indicator (purple)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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