Author: UkuriaOC, CryptoVizArt, Glassnode; Translated by: Deng Tong, Golden Finance
Large entities currently hold approximately 4.9 million BTC, equivalent to 25% of the circulating supply. Among these entities, centralized exchanges and ETF custodians account for the largest share.
After the German government completely exhausted the BTC sell-side market, the sell-side market appears to have eased in the short term, while demand has also re-emerged to support the market.
Market profitability remains very strong with the majority of token supply remaining on a favorable cost basis below current spot prices.
Evaluating Large Entities
The landscape of Bitcoin holders is always evolving, which requires analytical frameworks to evolve over time. Historically, miners and exchanges have been the largest and most dominant Bitcoin holders.
Throughout history, large amounts of tokens have ended up in the custody of market-neutral entities, such as the Mt. Gox trustee, which was tasked with holding tokens recovered following the collapse and bankruptcy of the Mt. Gox exchange. Similarly, large amounts of tokens have been seized by government law enforcement and periodically sold in batches.
Recently, institutional-grade custodians and ETFs have also entered the market. 11 new US spot ETFs have now accumulated a cumulative +887K BTC, making their combined balance the second-largest Bitcoin pool we monitor.
The chart below shows the amount of BTC held by these large entities.
Centralized exchanges: 3 million BTC (yellow)
US ETF Balance: 887,000 BTC (grey)
Miners including Patoshi: 705,000 BTC (blue)
Government entities: 207,000 BTC (green)
Mt Gox Trustee: 139,000 BTC (red)
Miners have historically been the primary source of sell-side pressure, but their supply relevance does decline with each halving event. Net miner flows over the past 12 months show that total balance changes are typically around ±500 BTC per week.
In the chart below, we compare miner net flows (blue) to net deposits/withdrawals from centralized exchanges (red) and net flows from ETF on-chain wallets (green). We can see that the latter two entities typically see larger ±4K BTC swings, suggesting that flows through these entities may have 4-8x more market influence than miners.
Using this net flow dynamic as our baseline, we can measure the estimated intensity of seller pressure from large entities by isolating only net outflows. From this, three key observations can be made:
Increased sell-side pressure from miners tends to occur during periods of price volatility.
After the market hit new highs in March, ETF outflows dominated, led by the GBTC product.
The sell-side flows from the German government over the past few weeks have been significant. However, we can also see that most of the outflows occurred after the price dropped to $54,000, suggesting that the market actually got ahead of the news.
The chart below shows the cumulative net outflow activity of these large entities since the all-time high of $73,000. From this we can see that the selling pressure from miners is relatively small relative to government selling, ETF outflows, and exchange deposits.
Centralized exchange deposits remain the largest and most persistent source of sell-side pressure. However, even capping these major trading venues, we can see that the recent sell-side from the German government is significant.
As we focus on the growing selling pressure from the German government, we can see that their 48.8k BTC balance was depleted in just a few weeks. Most of the funds were drained in a very short period of time between July 7th and July 10th, with over 39.8k BTC flowing out of the marked wallets.
Interestingly, this sell-off occurred after the market bottomed out around $54,000, suggesting that the market got ahead of the news.
Stability and speculation
After an extended period of range-bound trading, the total net inflows for all ETFs have experienced sustained outflows. With prices falling to a low of $54,000, the average inflow cost basis for ETF holders has fallen below and is now $58,200.
In response, the ETF saw significant positive gains for the first time since early June, with total inflows exceeding $1 billion in the last week alone.
Deposits and withdrawals to exchanges are often a strong indicator of investor interest and market liquidity. After hitting an all-time high in March, exchange traffic has declined significantly, while BTC trading volume (red) has since maintained a stable baseline of approximately $1.5 billion per day.
If we compare the inflow and outflow structure of Ethereum (blue), we can see that interest in Ethereum has clearly decreased relative to the 2021 bull cycle. At the peak of the 2021 bull cycle, ETH's daily exchange flow was almost as large as BTC's.
This suggests relatively low levels of speculative interest in 2024, consistent with ETH’s generally weaker performance relative to BTC since the 2022 cycle low.
The size of realized profits and losses locked in by investors can also serve as a proxy for demand. Using this metric, we can see a similar situation, with large demand supporting a rally, followed by a period of compression and consolidation.
This highlights the balance being established between supply and demand over the past 3 months. We can also see that despite the market retracing over -25% from its highs, realized losses have not increased significantly to date, suggesting limited panic.
Seller Net
If we consider exchange inflows for BTC and ETH as seller pressure, we can compare it to stablecoin inflows, a proxy for demand. With this metric, we are able to assess the overall balance between buyer or seller bias in the market.
We can think of this through the following framework:
Values close to zero suggest a neutral regime, where buyer inflows are comparable in magnitude to seller pressure from both major assets.
Positive values indicate a net buyer dynamic, where stablecoin buyers outnumber sellers of the primary asset. (Green)
Negative values indicate the presence of a net seller mechanism, where seller volume exceeds available new stablecoin capital to absorb it. (red)
We can see that the market has been in a net seller regime since mid-2023, but this has been declining over the past few months.
We can see similar dynamics using the spot cumulative volume delta (CVD) metric. This tool measures the net difference between buy and sell volume on centralized exchanges.
Viewed from this perspective, we can see that sellers have taken significant dominance since the all-time high in March. However, as of last week, CVD had recorded its first net buyer indicator since July, indicating that seller pressure on the physical market has subsided.
Investor profitability remains strong
As the price of Bitcoin fell to a local low of $535,000, the percentage of money supply with unrealized losses surged to around 25% of the money supply. This caused the profit supply percentage indicator to fall back to its long-term average of 75%, which is its historical level during previous bull market corrections.
By separating the percentage of token supply held by long-term and short-term holders, we can assess the impact of price contractions on both groups.
The profitability of the short-term holder (STH) community has dropped dramatically over the past 30 days, with over -66% of supply turning into unrealized losses. This is one of the largest drops in STH profitability on record.
This suggests that a large number of “top buyers” have seen portfolio profitability challenged in recent weeks.
However, for the opposite group, long-term holders, the percentage of their supply that has taken profits has barely changed. This suggests that relatively few investors still held tokens at the peak of the 2021 bull run.
Overall, this suggests that the STH cohort remains the primary group most likely to react to market volatility, with their average cost basis currently sitting at around 64.3k.
Summarize
Examining the size of the primary sell-side power, miners have historically been the primary source of sell-side pressure, however, we note that with each halving, their impact on the market has seen diminishing returns. In contrast, ETF flows and centralized exchanges have become convincingly more relevant to price action.
The Bitcoin market absorbed 48,000 BTC last month as the German government achieved full distribution of its balance sheet. The complete demise of the German government’s selling pressure provided ample relief to the market, while initial signs of a re-emergence of the demand side spurred positive price action.
Short-term holders have experienced a challenging month, with the recent correction leaving a significant portion of their token supply in the red. In contrast, sophisticated investors have remained steadfast, with profitability barely declining, highlighting their impressive conviction and solid market positioning.
