Recently, with the German government's selling, about 48,000 bitcoin assets have flowed into the market. At this time, the redistribution of assets originally belonging to Mt. Gox is also coming. In this article, we will study how these new forces in the seller's market and ETF products will leverage market prices.
Summary
Current status of large entities holding coins: Currently, large entities hold a total of about 4.9 million BTC, accounting for 25% of the market's circulating supply. Among them, CEX and ETF custodians hold the largest proportion of assets.
Market reaction: After the German government sold off Bitcoin, the market favored sellers in the short term, and then new capital flows poured in again, supporting the market again.
Market Profitability: Despite volatility, the majority of Bitcoin supply remains below the current spot price, indicating that market profitability remains very strong.
Evaluating Large Entities
The landscape of Bitcoin holders is constantly evolving, so we need to adjust our research framework over time. Its main players include miners, trading platforms, independent entities (such as Mt.Gox trustees), government law enforcement agencies, and institutional custodians and ETFs. These large entities have a significant impact on the market.
Holdings Analysis
The chart below shows the amount of BTC held by these large entities.
CEX: Holding approximately 3 million bitcoins, it is the largest source of seller pressure in the market.
US ETF Balance: With the launch of 11 new US spot ETFs, it holds a total of 887,000 bitcoins, becoming the second largest holder of Bitcoin assets.
Miners including Patoshi: 705,000 Bitcoins, although a major source of sell-side pressure in the past, its influence has gradually diminished as the halving event progresses.
Government entities: hold 207,000 bitcoins, of which government law enforcement agencies regularly sell seized bitcoins in batches, causing short-term shocks to the market.
Mt. Gox Trustee: Responsible for safekeeping of Mt. Gox assets after its bankruptcy. It currently holds 139,000 bitcoins. The redistribution of its assets will affect the market.
Figure 1: Bitcoin balances held by large entities
Market dynamics analysis
In the figure below, by comparing the net flow changes of Miner and CEX, as well as wallets on the ETF chain, we can see the extent of the impact of different entities on the market. The net flow of the Miner group fluctuates less, while the assets of CEX and ETF fluctuate significantly, which has a more significant impact on the market.
Miner Net Flow: Over the past 12 months, weekly changes have typically been around ±500 BTC, indicating a weakening correlation with market supply.
CEXs and ETFs: Asset volatility typically reaches ±4,000 BTC, indicating that these entities can have 4 to 8 times greater impact on the market than miners.
Figure 2: Comparison of total traffic of large entities (7-day total)
Sell-side pressure analysis
Analyzing the net outflows from large entities separately provides a measure of the selling pressure they bring. We can draw three important conclusions:
Miner pressure: When prices fluctuate, seller pressure from miners often increases.
ETF outflows: After Bitcoin prices hit a new high in March, outflows from ETFs dominated, mainly from GBTC products.
Government sell-off: The 48,000 Bitcoins sold by the German government were quickly consumed in a short period of time, causing a significant impact on the market. But most of the outflows occurred after the price dropped to $54,000, suggesting that the market actually got ahead of the news.
Figure 3: Total sales of large entities
The following chart shows the cumulative net outflow of assets from these large entities since the all-time high of $73,000. From this we can see that compared with the asset flood from government sellers, ETF products and trading platforms, the selling pressure from Miner is relatively small.
Assets held on CEXs remain the largest and most persistent source of sell-side pressure. However, even if outflows from CEXs are unfathomably high, we can still see the terrifying scale of the recent sell-off from the German government.
Figure 4: Total sales volume of large entities
Market stability and speculation
Market stability: a positive sign for ETF flows
All ETFs experienced a period of net outflows after a prolonged period of price volatility, and with prices hitting a low of $54,000, ETF holders are now below their average cost basis, currently sitting at just $58,200.
In response to the prolonged market decline, ETF products saw significant positive investment for the first time since early June, with inflows exceeding $1 billion last week.
Figure 5: US Bitcoin Spot ETF Fund Flow
Speculative sentiment is waning: a shift in investor interest
The amount of money flowing in and out of trading platforms is often a strong indicator of investor interest and market liquidity. As the price of Bitcoin hit an all-time high in March, the flow of funds on trading platforms declined significantly, while Bitcoin trading volume has since remained at around $1.5 billion per day.
Compared with the inflow/outflow structure of Ethereum, investors' interest in Bitcoin is more stable. Ethereum's inflow/outflow volume was comparable to that of Bitcoin at the peak of the bull market in 2021, but has now decreased significantly, which further confirms the decline in investors' speculative interest.
Figure 6: Bitcoin/Ethereum Inflow/Outflow from Exchange Platforms
Supply and demand balance and market sentiment
The realized gain/loss data reveals the delicate balance between supply and demand in the market.
Although the market has corrected more than 25% from its highs, realized losses have not increased significantly, indicating that the market has not fallen into panic selling. On the contrary, investors seem to be waiting for a better time to enter the market, and the market mentality tends to be cautiously optimistic.
Figure 7: Realized Gains/Losses
The net seller's market is shifting to a buyer's market
View the inflows of Bitcoin and Ethereum into exchanges as sell-side pressure and compare them to the inflows of stablecoins - since stablecoin inflows represent market demand, this metric allows us to assess how the market is roughly balanced between buyers and sellers.
Values close to zero indicate a balanced market, where buyer inflows are equal to seller pressure in both major assets.
A positive value indicates a buy-side market, where stablecoin buyers outnumber sellers of major assets.
Negative values indicate a sell-side market, where new stablecoin inflows into the market absorb oversold asset volumes.
As shown in Figure 8, the market has been in a net seller position since mid-2023. But in the past few months, it has been shifting to the other side.
Figure 8: Buy/sell asset inflows of major digital assets
The spot cumulative volume delta (CVD, measuring the net difference between buy/sell volumes in CEX) indicator also shows similar market dynamics.
We can see that sellers have dominated the market since Bitcoin prices hit an all-time high in March. However, as of last week, CVD has recorded its first net buyer indicator since July, indicating that the seller pressure facing the spot market has weakened.
Figure 9: CVD indicator for all trading platforms (7-day moving average)
Investor profitability remains strong
As the price of Bitcoin fell to a local low of $53,500, the proportion of supply held by investors at a loss has surged to around 25% of the total supply. This has caused the profit supply percentage indicator to fall sharply to 75% of its long-term average, reaching the historical low during previous bull market corrections.
Figure 10: Oscillation of profit supply percentage
Analysis of investor profitability reveals market responses of different investor groups.
Over the past 30 days, short-term holders have suffered significant losses in the market correction, with their profitability falling sharply, with more than 66% of the supply turning from profitable to unprofitable.
However, long-term holders showed strong resilience, with their profitability barely affected, which indicates that long-term investors have stronger confidence in the market and pay more attention to long-term value rather than short-term fluctuations.
Figure 11: Changes in profitability of different investor groups
Summarize
Although miners have historically been the main source of sell-side pressure, we have noticed that their impact on the market has been decreasing with each halving. Instead, assets from ETF products and CEXs have begun to play an increasingly important role in market prices.
With the actions of the German government, the market absorbed 48,000 bitcoins last month. The selling pressure from the German government was absorbed by the renewed buying demand, which eased the strong selling pressure faced by the original market. Since then, new demand has reappeared, which has stimulated the future positive trend of prices.
Short-term holders have undoubtedly had a challenging month ahead, with the recent pullback leaving a significant portion of their assets in the red.
In contrast, sophisticated investors remained steadfast, with little decline in profitability, highlighting their continued confidence in the market and their continued commitment to sound investment strategies.
Source: https://insights.glassnode.com
Original author: UkuriaOC, CryptoVizArt, Glassnode
Original link: https://insights.glassnode.com/the-week-onchain-week-29-2024/
Proofreading: Akechi, Anna
Layout: Anna
Review: Amber
