As the Bitcoin halving approaches, an event that is expected to reduce the daily BTC minting supply by half, several crypto industry analysts have provided their insights on the current state of the volatile crypto-assets markets.
The Bitfinex Alpha Report aims to offer a comprehensive analysis of the current state of the cryptocurrency market.
As shared with CI, here are some key takeaways from the report’s findings:
The sharp pullback from Bitcoin’s new March 14 high is “set to test institutional appetite for the largest crypto asset.”
Altcoins appear to have shown resilience in “the face of Bitcoin’s declines and despite Ethereum’s lackluster performance in the wake of the Dencun upgrade, but record outflows from exchanges together with unprecedented activity on DEXs paints a bullish picture for Ethereum’s token.”
Some ETH outflows could be down “to traders shifting their activities to Layer 2s such as Base, which has seen its TVL double in the past two weeks to hit $800mn.”
Bitfinex analysts noted:
“In light of Bitcoin’s recent all-time high and subsequent correction, we anticipate a period of market recalibration as investors seek equilibrium amidst unprecedented inflows into Spot Bitcoin ETFs. Conversely, the altcoin market’s resilience, evidenced by growing investment flows and record outflows of ETH, underscores a bullish narrative for Ethereum and Layer 1 blockchain projects. As the market evolves, the performance of large-cap altcoins will be instrumental in determining its trajectory.”
In a separate update shared with CI, Matteo Greco, Research Analyst at the publicly listed digital asset and fintech investment business Fineqia International noted that Bitcoin (BTC) ended the past week at approximately $68,400, “showing a slight 0.8% decrease from the previous week’s closing value of around $69,000.” However, BTC is trading just below $65,000 at the time of writing.
Throughout the week, BTC displayed significant volatility, “with a price range of 13.4%.”
The past week had commenced with robust momentum “as BTC surged to $72,000 on Monday.”
Matteo Greco added that subsequently, the price reached “a new all-time high of nearly $73,800 on Thursday, following peaks of over $73,000 on both Wednesday and Thursday.”
However, on the same Thursday, BTC experienced “a sharp decline to $68,000 before rebounding to close around $71,400.”
Matteo Greco also mentioned that “on Friday and Saturday, selling pressure persisted, driving BTC to trade as low as $64,700 and closing Saturday near $65,300. However, positive momentum returned on Sunday, nearly recovering the weekly loss and closing around $68,400.”
Despite the volatility and fluctuating prices, Matteo Greco said that “the previous week demonstrated continued strong momentum for BTC Spot ETFs, with net inflows recorded on all trading days.”
The weekly net inflow “surpassed $2.5 billion, with Tuesday alone witnessing a net inflow of over $1 billion. The cumulative net inflow since inception now stands at approximately $12.2 billion.”
Trading volume for BTC Spot ETFs also “witnessed an upward trend, with total trading volume reaching $141.7 billion since inception, including nearly $28 billion traded in the last week. This translated to a daily trading volume exceeding $5.5 billion during the previous week, contributing to a higher average daily volume since inception, currently standing at approximately $3.15 billion.”
These figures underscore “the sustained momentum of investments from traditional finance into the digital assets space.”
Matteo Greco added that “despite BTC’s price stability last week, the demand primarily stems from ETFs, while native digital assets investors are more active on the selling side.”
Matteo Greco also noted that this trend is “evident in the decrease of BTC held by long-term holders, referring to BTC that remained unmoved for at least 155 days.”
At the beginning of 2024, this supply “was nearly 16.3 million BTC, gradually decreasing to about 15.1 million BTC as now.”
Matteo Greco further noted that this shift “reflects traditional investors driving buying activity through ETFs, while native digital assets investors, who accumulated during the downtrend in 2022 and 2023, are now profit-taking at a higher rate, reducing long-term holder supply.”
Such behavior is characteristic of early bull phases, “where long-term holders distribute assets to new investors. If the current market remains in an uptrend, analysing the past cycles, this pattern could persist until the supply from long-term holders matches the demand from new investors, which usually coincides with the cycle’s peak and the beginning of a downtrend phase.”
Notably, the BTC halving is “approximately one month away, historically preceding cycle peaks between 6 and 12 months later.”
Matteo Greco concluded that if historical patterns repeat, “the current cycle’s peak could occur in late 2024 or the first half of 2025,”
Other key insights shared by Lucas Kiely, chief investment officer of digital wealth platform Yield App, pointed out that that Bitcoin’s price action over the past week was a ‘run-through’ for pre-halving turbulence.
He estimates that a 20% correction and price support around $60,000 is “likely in the coming weeks as Bitcoin enters the ‘danger zone’ typically preceding halving events.”
Lucas Kiely, Chief Investment Officer of digital wealth platform Yield App, says:
“Last week was a ‘welcome to Bitcoin’ tutorial for those who entered the space on the back of the ETF mania. It ticked all the boxes: a new all-time-high at nearly $74,000 sparking euphoria, a touch of inflation news triggering speculators and spooking weaker-handed investors, and a weekend dip to temper the excitement. In a nutshell, business as usual for Bitcoin. It was far from the crash courses we’ve seen during previous cycles, however. A pullback was to be expected considering Bitcoin’s steep climb over the past few weeks. If there were any surprises, it’s that the correction was a mild 12%, as compared with the 20 to 30% dips we’ve seen in the past.”
He added:
“In part, this showcases Bitcoin’s current resilience to the macro environment. Thursday’s news that US inflation came in at double the level expected in February may have caused the weekend’s short-lived dip, but BTC entirely ignored the CPI report earlier in the week. On the other hand, Bitcoin’s price moves over this past week are a run-through for the turbulence ahead, and a clear sign to buckle up as we enter the pre-halving ‘danger zone’. The days before the halving saw BTC nosedive as much as 40% in 2016, and 20% in 2020, and we’re just warming up for this cycle’s pre-halving price action.”
He concluded:
“Given Bitcoin’s newly acquired institutional status and apparent immunity to external factors, a 2020 scenario with price support around the $60,000 mark is more likely than the 2016 doomer view. But if crypto has taught us anything, it’s to expect the unexpected.”
Digital asset investor Anthony Pompliano said that Bitcoin holders that previously showed strong-hands are “starting to sell their bitcoin.”
This shouldn’t be a surprise — as the price of bitcoin rises, “some percentage of holders are willing to sell their assets to take profit off the table.”
Pompliano also shared that we can see “the number of bitcoin in the circulating supply that had not moved in at least 1-year topped out at just over 70% from November 2023 to late January 2024.”
He added that if zero bitcoin holders were “willing to sell their bitcoin at the current price levels, the price of bitcoin would have to keep going up aggressively until the net new demand from spot ETFs could find a clearing price in the market.”
He pointed out that you can “see a similar trend occurred in 2013, 2017, and 2020. Bitcoin holders began to sell their bitcoin as the bull market got kicked off. The selling of bitcoin continued to accelerate as the market saw prices increase over time.”
He also mentioned that holders “could also be spending their bitcoin,” but … “regardless of whether you are selling bitcoin for USD, a product, or a service, you are still getting rid of your bitcoin.”
According to Pompliano, a big takeaway from this metric is “that the bull market has definitely begun.”
And a relatively small percentage of bitcoin (< 5%) that “was previously dormant is now on the move.”
As noted by Pomp, the 60% year-to-date “increase in price, and the 140% increase over the last 12-months, has convinced some holders to part with their bitcoin.”
This trend is confirmed by looking “at the percentage of bitcoin that has not moved in the last 2-years as well.”
He pointed out that we “saw a top to that metric in January 2024 as well.”
He also noted that we see the same thing when looking “at the net change of the 30-day supply for long-term bitcoin holders. The deep drawdowns in red started in 2013, 2017, and 2020.”
Pompliano said that it seems like “we will be able to add ‘2024’ to that list by end of year.”
According to Pomp, the good news is that Bitcoin’s network is “completely oblivious to what is happening with the asset’s dormancy.”
He added that we have continued “to see hash-rate increase at an exponential rate and we hit a new all-time high [recently].”
He continued:
“And interestingly enough — the number of successful transactions on the bitcoin network has seen a step-function change over the last 18 months or so. I am not personally changing anything in my portfolio at the moment due to this information, but I am spending a lot of time watching it. The market is showing us that the weakest hands in the bitcoin industry have found their pain tolerance threshold to be around $70,000 per bitcoin.”
He concluded:
“They either sold because they needed to or they felt that the current offering price was more than sufficient. Most of the bitcoin holders, especially those who have been holding for at least 1 year, are not yet convinced that bitcoin’s price is high enough to part with their digital currency. Just as in past cycles, this will change in the coming months or years. But in order to find out where that clearing price is, bitcoin’s price will have to continue to appreciate.”