Has Bitcoin Lost Some Of Its Shine?

Bitcoin Expectations

Bitcoin price action has, by most measures, been dull.

In the period since 1 July, BTC has posted a new all-time high of 123k before retracing to $108k.

While Treasury companies and smart money institutions have continued to buy up BTC, the price has flatlined.

Since the start of July, the total net inflows/outflows in the spot ETFs were around 655k bitcoin. It now sits at around 702k.

In the same period, Treasury companies have increased their holdings from 850k bitcoins to 996k.

In total, around 193k BTC has been accumulated by Treasury companies and institutions in the period since 1 July.

However, in that same period, long-term holders have exchanged and transferred 450k coins to short-term holders as long-term holders have taken profits and/or rotated into spot ETFs or altcoins.  

The transfer of long-term holder positions began, not surprisingly, as BTC approached the all-time high, and, historically, the peak in transfer is more often followed by a peak in price action.

That transfer of long-term holder positions has started to gain momentum again in the last couple of weeks. The percentage of BTC held by long-term holders is decreasing, and the rate of the decrease is accelerating.

Derivatives

Looking at the derivatives market, there has been a notable increase in the open interest of BTC. A similar trend can be seen in open interest contracts and in the options market.

The amount of BTC that has been held in derivative perpetual futures contracts has increased by 50k since 1 July.

In short, the current BTC price action is being driven by the supply and demand economics of the network.

While accumulation by institutional smart money and Treasury companies has increased, there has also been a noticeable increase in profit-taking from long-term retail participants.

From a supply and demand perspective, the market is in equilibrium.

At some point in time, for an asset like Bitcoin, all the speculators and all the bad leverage disappear.

If the price is down long enough from the all-time high, in both time and duration, the investors with paper hands are shaken out.

That leaves only hodlers. There are no sellers left. The market hits an exhaustion point.

Bitcoin Cycle

The current bitcoin cycle is structurally different. Institutions and treasuries are driving performance.

Bitcoin is a much bigger asset, and it takes a lot more gunpowder to move it.

It has not had a parabolic move, and the moves have all been structured bids. Every time there is a dip, the institutions buy.

That explains the tight channel and low volatility.

Historically, there are just 10 days of the year that Bitcoin makes its most significant moves to the upside.

The balance of probability suggests more chop consolidation in September with the potential for a drawdown that could be triggered by activity in the broader stock market. Expect resistance at the $117k level.