Bitfinex Alpha | LTHs, Whales & Miners put pressure on BTC

Last week was a tumultuous week for Bitcoin with significant net outflows from Spot Bitcoin ETFs, snapping a 20-day streak of inflows, and reminiscent of the outflows observed at the end of April. 

Indeed, historical patterns suggest that while ETF investment flows are a metric worth watching to gauge investor sentiment on BTC, such flows might not necessarily align with “smart money” flows, and are more reactionary to price changes rather than predictive of market direction. Every time BTC has climbed above $70,000, net ETF inflows have registered close to $1 billion per day. As the price headed lower last week, ETF flows were negative on four days out of five.

We believe a more critical determinant of BTC’s valuation last week, was the key US consumer inflation data that was released and the Federal Reserve’s interest rate decisions.

In fact on-chain metrics show that most of the selling seemed to be coming, not from ETF investors, but rather Long-Term Holders, whales and miners. The Hodler Net Position Change metric, which measures whale holdings, have been showing consistent negative values for the past nine days, while the Bitcoin:Exchange Whale ratio has continued to climb as more Whales deposit balances on exchanges. These two entities command more BTC than the ETFs, and have clearly put pressure onto the market.

Further, miner reserves have continued to decline, even post-halving, suggesting that miners are struggling to maintain operational efficiency and are continuing to sell assets to maintain profitability and invest in upgraded machinery. That said, with miner reserves nearing four-year lows, the selling pressure from this group might be reaching a critical low.

BTC took fright last week after the Fed indicated that aside from maintaining current interest rates, it was likely to postpone any potential rate cuts until December. However, despite this bearishness, we note that other real economy indicators released last week suggested there was room for more optimism.

Both CPI and PPI have shown signs of easing on a month-on-month basis and the historically tight labour market is finally beginning to loosen – a situation the Fed will not want to see persist too long.  These factors suggest that a first rate cut is still quite plausible in September, followed by a further cut in December.

Meanwhile the prospects of an Ether ETF looked more positive last week after Securities and Exchange Commission Chairman Gary Gensler hinted at a possible approval in the coming months. Analysts forecast the first spot Ether ETF could debut as soon as July 2nd, following reported feedback that the SEC requires only minimal adjustments from applicants.

Additionally, a BIS survey revealed a significant uptick in CBDC experiments among central banks, with proof of concept projects increasing by 35 percent and pilots nearly tripling from 2022 to 2023, especially in advanced economies.

It shows how far crypto has come. Happy Trading!

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