Flows: Bitcoin Funds See Most Outflows Over Two Weeks Since ETF Approval

ETH: Ether Spot ETFs to Attract $15B of Net Inflows in First 18 Months: Bitwise

Politics: Crypto industry super PAC is 33-2 in primaries, with $100 million for House, Senate races

SOL: VanEck kicks off solana ETF bid in the US

Miners: Bitcoin miner sell pressure ‘weakening’ as BTC withdrawals drop 85%

It was a tough week for digital asset valuations as the largest cryptocurrency, Bitcoin (BTC) has seen roughly $60 billion wiped from its market cap over the past seven days. That watered its unit price all the way down to roughly $61,000 by Friday morning. BTC is still up roughly 38% in the year-to-date period, but is on track for its second month in the red out of the past three – a span which correlates closely with the time that has passed since BTC most recently shot to all-time highs in March.

The breakdown in momentum has coincided with a massive drop in the number of active addresses on the Bitcoin network. MRP first highlighted this phenomenon several weeks ago, and it has continued on since then. Per Glassnode data, the seven-day moving average of active addresses on the Bitcoin network was counted at just over 608,300 on June 7, a five-year low going back to February 2019 when BTC was trading near $3,460. The weekly ratio of active Bitcoin addresses in comparison to the total number of addresses with a balance peaked at just 1.32% in June. Such a muted peak was last seen all the way back in November 2010. This breakdown in activity is trending alongside a decline in transfers of BTC that had previously been idle for more than a year. These factors suggest that the velocity of the “distribution phase” MRP has previously highlighted could be slowing, a potentially troubling prospect for Bitcoin bulls, but maybe not as dire a situation as it seems at first glance. 

Chart Provided by Glassnode

After each boom in the price of BTC, a bust sequence tends to take place sequentially. During the so-called “bust”, when the price of Bitcoin declines, long-term adopters continue to accumulate scarce BTC while traders sell. The share of BTC held by these long-term adopters is often quantified by the amount of BTC that has remained untransacted for 1+ years. Traders, or anyone else seeking to make short-term gains, tend to make up a minority share of Bitcoin ownership. Each boom in demand mints a new class of long-term adopters and the bust allows this increasingly large cohort to accumulate more than they could have during the boom due to the suppressed prices. When prices begin rising again, induced by shifting economic conditions and monetary policy decisions that tend to drive assets toward hard money assets like gold and Bitcoin, the most aggressive portion of a boom can often be confirmed by a material decline in the supply of BTC left untransacted for a year or more.

Between September 2020 and November 2021, for instance, Bitcoin’s unit price surged from around $10,300 to nearly $69,000. Throughout that same period, the portion of BTC’s supply that had been idle for a year or more slumped from 63.5% to 54.5%. This decline signals a shift from accumulation to distribution among long-term adopters, as the appreciation of Bitcoin prices becomes so rapid that it can even shake loose some of the coins held so tightly by faithful long-term adopters who now feel the urge to take some profit by selling to new entrants drawn in by speculation. Historically, the BTC accumulation that takes place when prices are subdued results in a smaller share of supply available on the market for new entrants than at the start of the previous boom, helping prices eventually push toward new all-time highs.

Following an accumulation phase that spanned many months, including all of 2022, a record 70.8% of all Bitcoin had remained untransacted for a year or more by last November. That plateau held through January when distribution from long-term adopters to new entrants began. The new entrants created a strong imbalance in supply and demand, reflected in the more than 73% price appreciation of BTC throughout the first quarter of 2024. The percentage of BTC’s circulating supply that had remained unspent for 1+ years tumbled to 66.5% by the end of March. A lack of further distribution since then explains part of the drop-off in active addresses; long-term BTC holders are simply not ready to sell their coins at these levels and the bidders at higher prices have simply not yet appeared.

Chart Provided by MacroMicro

New entrants, which can usually be tracked on chain via the active addresses metric, are nowhere to be found right now. Though some might suggest that interest in BTC is simply not spiking to the degree that it usually does when prices head to record highs, this is demonstrably false based on the relentless and unprecedented inflows to spot-backed Bitcoin ETFs that were launched earlier this year. Not only have these newly created funds collectively accumulated a net 589,500 BTC ($35.8 billion) in less than six months of trading, that sum adds to the more than 278,000 BTC ($16.9 billion) still custodied by Grayscale’s Bitcoin Trust (GBTC), which existed as a pure trust product for a decade before being converted to a spot ETF in January. BlackRock’s iShares Bitcoin Trust (IBIT) is the largest of these funds by AUM and reached the $20 billion threshold faster than any other ETF product in history, beating the second-fastest JPMorgan Equity Premium Income ETF (JEPI) to that level by a margin of 848 days.

Based on these figures, some portion of the usual tide of new entrants who would be represented by active addresses on chain are instead choosing the path of least resistance and gaining exposure to spot BTC ETFs, as opposed to buying and holding the coins themselves. That could be funneling many thousands of newly-minted Bitcoiners through a very small number of custodial addresses controlled by the universe of ETF sponsors. Spot BTC ETF products, which are now owned by about 1,000 institutional filers of 13F reports with the US Securities and Exchange Commission (SEC), are changing on-chain analysis in an unprecedented way, but it is still likely that some amount of recovery in active addresses should be expected for the unit price of BTC to move materially above its previous record high near $73,800.

June 10, 2024: Bitcoin Miners Moving Into Traditional Data Centers’ Cloud Market, Could Soon Become Targets for M&A →

May 28, 2024: Grayscale’s Bitcoin Drain Could be Test Case for Coming Distribution of 142,000 BTC in Bankruptcy Payout →

May 21, 2024: ETH Surges on Emerging Potential for Spot ETF Approvals, Final Decision Date on Deck This Week →

April 23, 2024: Bitcoin Hash Rate Holds Strong in Wake of Halving, Suggesting Miner Margins May Remain Intact →

March 25, 2024: SEC Reportedly Probes Ethereum Foundation but Would Struggle to Backtrack on ETH’s Commodity Status →

March 5, 2024: Bitcoin’s Dominance over Crypto Holds Strong Amid New ATH, ETF Hype Could Help Ethereum Pick up the Slack →

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