As a crypto investor with a few years of experience under my belt, I find the current market dynamics intriguing yet puzzling. The recent inflows into US spot Bitcoin ETFs are undeniably impressive, and it’s no secret that I have been eagerly anticipating a substantial price surge. However, the fact that BTC remains below the $100,000 mark despite these inflows has left many of us wondering why.
Despite considerable investments in US Bitcoin Exchange-Traded Funds (ETFs), totaling over $1.5 billion in the past three days and marking an unmatched 18-day streak of positive inflows, Bitcoin’s price has yet to reach the widely anticipated $100,000 threshold. At present, the digital currency is valued at approximately $71,000, representing a 50% rise since the ETFs were launched but falling short of setting a new peak price.
Charles Edwards, the CEO of Capriole Investments, recently addressed a common query from the community through a post on X: “Why haven’t we reached $100,000?” According to Edwards, this question has multiple explanations that go beyond just ETF investments.
Why The Bitcoin Price Isn’t Rallying Higher
Edwards highlights an intriguing observation: US Bitcoin spot ETFs have purchased twice as much BTC as was mined since their debut in mid-January, showcasing strong investor interest. Surprisingly, the anticipated price increase, which many anticipate, has yet to manifest itself.
Edwards pointed out that the amount of Bitcoin flowing into Exchange-Traded Funds (ETFs) is historically high, indicating strong demand. However, this inflow is being counterbalanced by a decrease in the percentage of Bitcoin’s total supply held by long-term investors. In December 2023, this group held 57% of the total Bitcoin supply, but as of now, their share has dropped to 54%. This change represents approximately 630,000 Bitcoins, which is nearly three times the amount of Bitcoin purchased by all US ETFs throughout the entire year.
“Edwards pointed out that the 3% transfer might appear insignificant, but it signifies a significant amount of Bitcoin being moved from robust investors in the market to those with a more speculative or short-term focus. Furthermore, some of this transaction activity doesn’t represent investors leaving the market entirely, but rather shifting funds from older investment instruments such as Grayscale’s Bitcoin Trust to newer Exchange Traded Funds (ETFs), which could skew the perspective on selling pressure.”
As a researcher studying the Bitcoin market, I want to emphasize that the impact of the halving, which occurred in April with the daily issuance dropping by 50%, has not yet been fully realized. The gap between the demand for Bitcoin from Exchange-Traded Funds (ETFs) and the supply from mining is expected to grow significantly over the next year. This is due to the lengthy process institutions undergo in evaluating, approving, and allocating funds, which typically takes a full quarter at best. Consequently, we can anticipate that the major ETF inflows are yet to come.
The intersection of market timing and macroeconomic factors adds complexity to the current situation. Edwards noted that historically, financial markets, including Bitcoin and cryptocurrencies, experience a dip in June due to risk-averse tendencies among large asset managers. Additionally, since Bitcoin’s peak price in March, the US dollar liquidity has remained stable at best or even decreased slightly. This liquidity situation plays a significant role in determining investors’ ability to invest in risk assets like Bitcoin.
Moving forward, Edwards maintains a positive yet cautious outlook. He identified three potential triggers that could propel Bitcoin’s value past $100,000: “Heightened daily purchases from ETFs, a reduction in disposals by long-term investors, and a revival of US market liquidity are crucial for significant price growth. Although these conditions might coincide down the line, the precise moment remains elusive.”
At press time, BTC traded at $71,659.
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2024-06-07 19:12