A key event impacting the market was Germany’s Bundeskriminalamt’s complete liquidation of over 48,000 BTC, which created substantial sell-side pressure. The market absorbed this influx, showing resilience and indeed renewed demand. The exhaustion of sell-side pressure from both the German government’s sale and miners, who have historically sold their holdings post-halving to upgrade infrastructure, has allowed for positive price action and recovery. The Miner Sustainability metric shows that miners are now fairly paid, marking their return to profitability for the first time in a month. This suggests the phase of upgrading machinery is nearing its end, which should alleviate further selling pressure from miners.
ETF inflows have also been positive, with almost $1.2 billion recorded last week, marking the first positive interest since early June. A key reason for this is that the price has risen above the average inflow cost basis of ETF holders, which is $58,200, and this has breathed new confidence into the market.
Orderflow metrics have also contributed to the sentiment. The spot Cumulative Volume Delta metric, which measures the net difference between market buying and selling volumes on centralised exchanges has reflected a shift towards net-buy-side activity for the first time since early March, indicating a softening of sell-side pressures.
As we also indicated in last week’s Bitfinex Alpha, the Long-term Holder Spent Output Profit Ratio which divides the price BTC is sold, by the price paid, is also showing that selling pressure from this cohort subsided in early July.
While the Bitcoin Exchange Reserve metric, which tracks the amount of BTC held in exchange wallets, shows that in recent weeks, there has been a rapid decrease in these reserves, suggesting that large investors have been buying the dip and moving their assets off exchanges. This behaviour points to accumulation and suggests a potential supply squeeze, which could drive prices higher in the coming months.
Another interesting dynamic is the cost basis for short-term holders (STH), whose realised price is currently at $65,176. Our analysis shows that as BTC has recovered, the STH realised price has also risen, indicating a resurgence in buying interest in general and confidence among short-term holders.
Additionally, the Short-Term Holder Spent Output Profit Ratio (STH SOPR) metric, which determines whether short-term holders realise profits or losses, has been below the equilibrium level of one, but is now beginning to move back towards this level. This indicates that while some short-term holders took an opportunity to buy the dip, there is also a sub-cohort that has realised losses on their spot holdings over the past two weeks when BTC was below their cost basis. If this metric is now moving back towards a mean value of one, it suggests that capitulation from this cohort of holders might be over.
Meanwhile, in the US economy, retail sales figures have shown that a significant slowdown in inflation over the past two months has positively impacted consumer spending, defying widespread expectations of a downturn. However, the housing market presents a contrasting picture, with single-family housing starts in June, plummeting to its lowest level in eight months. This downturn is primarily driven by high mortgage rates and a persistent shortage of affordable homes, creating significant headwinds for potential homebuyers.
Despite these challenges in the housing sector, the manufacturing industry has demonstrated resilience, with factory production exceeding expectations. This recovery in manufacturing is noteworthy, especially given the constraints of elevated borrowing costs that have generally pressured various sectors. The anticipated monetary policy easing by the Federal Reserve in September could offer much-needed relief, potentially stimulating growth in both housing and manufacturing sectors.
Additionally, the US Leading Economic Index continued to contract in June, but the rate of contraction has slowed compared to the past three months. The drop in the economic index during the first half of this year is smaller than the latter half of the previous year, suggesting a less negative long-term growth outlook.
Finally, the cryptocurrency industry is experiencing significant regulatory advancements. Spot Ethereum ETFs from Fidelity, VanEck, and others will begin trading on the Cboe exchange on July 23, 2024, following US SEC approval. Some firms are waiving fees initially to attract investors. In Hong Kong, the first stablecoin sandbox participants are prohibited from public fundraising during initial testing as the Hong Kong Monetary Authority develops a risk-based regulatory framework requiring future issuers to obtain licences. Meanwhile, South Korea has enacted the Virtual Asset User Protection Act, mandating exchanges to secure 80 percent of user deposits in cold storage, use licensed banks for cash deposits, maintain reserves, obtain insurance, and implement real-time monitoring, with penalties for non-compliance.
Have a great trading week!
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