It's been a long time since we wrote the previous idea, but now we're back with a bigger scale and will start with the current BTC situation.
The cryptocurrency market saw a sharp sell-off last week after rumors related to distributions from the Mt.Gox trustee and the U.S. government spread. By Wednesday, April 26, Bitcoin was once again facing serious resistance at $30k after a significant 10% rise since the beginning of the week. After the asset decreased to $27.2K, where the pressure was followed by the buyer's side. All this happened on the spreading of rumors inside Mt.Gox and American wallets, controlled by the Government. We also saw some activity from old BTC supply holders (>7 years old) which led to strong volatility in a low liquidity environment. After a significant rebound to values of $30k, Bitcoin quotes have fallen again and as of Monday evening, May 1, are at $28.2k.
If we consider the rumored movement of Mt.Gox coins, we see that their balance has remained stable at 137.9k BTC since the first allocation tranche in 2018, and not a single coin has been released from that wallet. While there has been no recent spending, the distribution is expected to begin in 2023, so we think it is important to monitor this balance, which is currently around $4 billion. Similarly, Bitcoin held by the U.S. Government has remained stable at 205.5k BTC. These coins come from seizures such as the Bitfinex hack in 2016 and the Silk Road hack in 2012. During the most recent BTC balance drop (March 7, 2023), 9,861 BTC were sent to the Coinbase exchange.
We can appreciate the flow of capital to and from exchanges as a measure of investor reaction. The recent rally was no exception: the exchanges have seen a non-trivial inflow recently, resulting in a net position change of over +30K BTC per month in recent weeks. This figure dropped slightly to 22.3 thousand BTC per month, which means less, but constant pressure from sellers in the market.
The growing share of younger supply during the rally is a sign of capital flowing into the market. It also signals that old supply (>6 months) is being spent, often using that liquidity of demand, resulting in a net transfer of cheap/old coins to new buyers at higher prices. The monthly change in the net young supply position shows that this net selling pressure has reached and stabilized at +250k BTC per month. This wave of demand has increased the total young supply by 366k BTC. Compared to the significant rally in the previous cycle, this pattern looks similar to the 2019 uptrend followed by an equilibrium period before the 2020-2021 bullish trend.
A similar pattern can be seen in the translation of dollar-denominated wealth into Young Supply. 28.2% of all invested capital is in the hands of recent buyers, which remains surprisingly low and still does not exceed the +40% threshold seen in previous bull markets. This suggests that the new inflow of demand remains relatively weak, but supply continues to be held predominantly by long-term holders with higher conviction.
Based on that, we can conclude that selling pressure from new investors was the key driving force that set resistance at the $30k level. If that current correction resumes, the underlying value of young supply holders at $24.4k could well be a psychological level to watch in the coming weeks. Thanks for reading, stay tuned!
The cryptocurrency market saw a sharp sell-off last week after rumors related to distributions from the Mt.Gox trustee and the U.S. government spread. By Wednesday, April 26, Bitcoin was once again facing serious resistance at $30k after a significant 10% rise since the beginning of the week. After the asset decreased to $27.2K, where the pressure was followed by the buyer's side. All this happened on the spreading of rumors inside Mt.Gox and American wallets, controlled by the Government. We also saw some activity from old BTC supply holders (>7 years old) which led to strong volatility in a low liquidity environment. After a significant rebound to values of $30k, Bitcoin quotes have fallen again and as of Monday evening, May 1, are at $28.2k.
If we consider the rumored movement of Mt.Gox coins, we see that their balance has remained stable at 137.9k BTC since the first allocation tranche in 2018, and not a single coin has been released from that wallet. While there has been no recent spending, the distribution is expected to begin in 2023, so we think it is important to monitor this balance, which is currently around $4 billion. Similarly, Bitcoin held by the U.S. Government has remained stable at 205.5k BTC. These coins come from seizures such as the Bitfinex hack in 2016 and the Silk Road hack in 2012. During the most recent BTC balance drop (March 7, 2023), 9,861 BTC were sent to the Coinbase exchange.
We can appreciate the flow of capital to and from exchanges as a measure of investor reaction. The recent rally was no exception: the exchanges have seen a non-trivial inflow recently, resulting in a net position change of over +30K BTC per month in recent weeks. This figure dropped slightly to 22.3 thousand BTC per month, which means less, but constant pressure from sellers in the market.
The growing share of younger supply during the rally is a sign of capital flowing into the market. It also signals that old supply (>6 months) is being spent, often using that liquidity of demand, resulting in a net transfer of cheap/old coins to new buyers at higher prices. The monthly change in the net young supply position shows that this net selling pressure has reached and stabilized at +250k BTC per month. This wave of demand has increased the total young supply by 366k BTC. Compared to the significant rally in the previous cycle, this pattern looks similar to the 2019 uptrend followed by an equilibrium period before the 2020-2021 bullish trend.
A similar pattern can be seen in the translation of dollar-denominated wealth into Young Supply. 28.2% of all invested capital is in the hands of recent buyers, which remains surprisingly low and still does not exceed the +40% threshold seen in previous bull markets. This suggests that the new inflow of demand remains relatively weak, but supply continues to be held predominantly by long-term holders with higher conviction.
Based on that, we can conclude that selling pressure from new investors was the key driving force that set resistance at the $30k level. If that current correction resumes, the underlying value of young supply holders at $24.4k could well be a psychological level to watch in the coming weeks. Thanks for reading, stay tuned!
