Bitcoin's bullish streak since the beginning of the year has exceeded 55%, as the fear of being left out (FOMO) begins to manifest.
The main driver of this run has undoubtedly been demand for US physically backed assets (ETFs), although the shallow market depth for actual tokens has played a key role. Currently, average daily demand for these assets is around six times greater than current supply growth.
Interest in Bitcoin has returned to Asian markets, as evidenced over the past week, and liquidity is declining at an interesting rate. Looking ahead, the most important event remains the upcoming halving, which is expected on April 22 and could intensify the gap between supply and demand, exacerbating a supply shortage.
Bitcoin's bullish streak since the beginning of the year has exceeded 55% amid a looming supply shortage.
Liquidations of short positions in the range of hundreds of millions of dollars have become a daily occurrence, reaching a staggering $400 million last Wednesday (February 28).
Bitcoin exchange-traded funds in the US remain the main driver behind prices as demand for ETFs was severely underestimated.
As of last week, the cumulative net flows recorded by the so-called 'newborn nine' (nine approved products, excluding Grayscale and Hashdex) have amounted to $16.4 billion, far exceeding Grayscale's $8.9 billion in outflows, leading to a total net flow of around $7.5 billion.
Grayscale's exits have been strongly linked to the Grayscale Bitcoin Trust's liquidations of FTX and Genesis holdings; So far, around 90% of the positions have been completely liquidated.
The market environment appears to be increasingly optimistic, with Asian markets once again becoming a key measure of retail demand. Since the beginning of the year, the price of Bitcoin had experienced minimal appreciation during Asian market hours, close to 2% of what was mentioned above.
However, since the beginning of last week, this figure has risen to 10%, which is more in line with previous cycles. Focusing on demand, the 20-day moving average for net flows into the 11 ETFs sits at around $300 million.
The problem is that the supply growth is approximately 925 Bitcoins per day, which, at current prices, is close to $55 million. Supply shortages could be further exacerbated if demand remains at current levels, especially after the upcoming halving.
Token supply on exchanges has decreased by around 20% since the start of Q4 2023, as more than 80% of all Bitcoins have not moved over the past six months, and over-the-counter counters have been closed. dried considerably.
Derivatives markets appear to be increasingly bullish, with a broad bias toward Bitcoin call options at most expirations.
Looking ahead, all eyes are on the next halving, expected in April. Meanwhile, the US macroeconomy has not been a dominant driver of the current run, although net liquidity has improved slightly, interest rates remain high, and the broader development of the asset class largely depends measure of venture capital money. That said, the price of Bitcoin has certainly discounted interest rate expectations for the year.
Manuel Villegas, Digital Asset Analyst, Julius Baer
Source: Territorioblockchain.com
