Recent news suggests that there are signs of Bitcoin whales selling off, while the US Bitcoin ETF is slowing down its accumulation of Bitcoin. The expectation of a rate cut by the US Federal Reserve in June has significantly decreased, and it is anticipated that the consolidation period for Bitcoin will last longer. There has been a significant increase in the inflow of funds into the Bitcoin ecosystem recently, and it is highly probable that there will be a breakthrough in Bitcoin’s price before the halving event, followed by further adjustments.
From on-chain data, there are indications of Bitcoin whales selling off, while the US Bitcoin ETF is also slowing down its accumulation of Bitcoin. The recent sale of Bitcoin by the US has caused market concerns and panic. According to reports, the US government has transferred more than 600 BTC (worth over $40 million) to new addresses in the past three days after transferring BTC related to the Silk Road. Wallets holding 100 to 1,000 BTC, often referred to as “whales,” have remained relatively stable, fluctuating between 13,872 and 13,841 since March 24, according to Santiment data. This stability indicates that these significant holders are not accumulating more Bitcoin at the moment.
In this bull market, the Bitcoin ETF has been the main driving force for the market. However, recent data shows a slowdown in its performance. From January to mid-March, there was a continuous increase in the inflow of funds into Bitcoin. However, since mid-March, there has been a downward trend in the inflow of funds into the Bitcoin ETF. From March 18 to March 22, there was a continuous net outflow of funds from the Bitcoin ETF. Although there is currently a net inflow of funds, the trend shows a significant decrease in the net inflow of funds into the Bitcoin ETF. Overall, there is significant selling pressure on Bitcoin, and the signs of continuous accumulation of funds have weakened.
The macroeconomic situation in the US will have an impact on Bitcoin. One of the reasons for the strong performance of various markets in March may be the signals of interest rate cuts from central banks. According to Bloomberg, all G10 central banks, except the Bank of Japan, are expected to cut interest rates in the coming year. The various developments last month strengthened this prospect. For example, during the meeting on March 19-20, Federal Reserve officials stated that despite expectations of strong GDP growth and rising inflation, they still plan to cut interest rates three times this year. Similarly, the Bank of England had no officials supporting a rate hike for the first time since September 2021, and the Swiss National Bank unexpectedly cut interest rates on March 21.
On April 5, the US non-farm payroll employment increased by 303,000, far exceeding the expected 200,000 and the previous value of 270,000, marking the largest increase since May last year. The rebalancing of the labor market is evident in data such as resignation, job vacancies, surveys of employers and workers, and the gradual decline in wage growth. The probability of the Federal Reserve’s first rate cut in June has dropped to around 50.8% according to the CME FedWatch Tool, and the market is pricing in a delay of the first rate cut from July to September.
In his latest speech, Powell stated that the latest data has not substantially changed the overall situation, which is characterized by steady growth, a strong but rebalancing labor market, and inflation gradually moving towards the 2% target. They expect not to reduce their policy rates until they have more confidence that inflation will sustainably return to 2%. Considering the strength of the economy so far and the progress on inflation, they have time to let future data guide their policy decisions.
Bitwu.eth, a well-known crypto influencer, expressed that the expectation of a rate cut by the Federal Reserve has significantly decreased, and the probability of the first rate cut in June falling below 50% raises questions about Powell’s statement of “three rate cuts this year.” With the huge debt and interest rates, the US has two choices this year to prevent an economic collapse in an election year: either meet market expectations by cutting interest rates or continue to expand debt. Regardless of which choice is made, it will further drive the bull market of gold and Bitcoin. It is unlikely that the transition from macro liquidity contraction to expansion will occur until 2024, and it is highly likely that interest rate cuts will officially begin in 2025, attracting a new wave of hot money.
Overall, the expectation of a rate cut by the Federal Reserve in June has significantly decreased, and the market is now leaning towards July or later. Some even believe that the rate cut may not happen until 2025. For Bitcoin, the market originally saw the rate cut by the Federal Reserve as a core driving factor for further price increases, as increased liquidity would make it easier to push up the price of Bitcoin. However, with the delayed expectation of a rate cut by the Federal Reserve and the weakening signs of whale accumulation, it is expected that the consolidation period for Bitcoin will last longer. In addition, geopolitical tensions, such as the Russia-Ukraine conflict and the Israel-Palestine conflict, have become important factors affecting Bitcoin’s price volatility.
In terms of the cycle, this current cycle is different in many aspects, such as the Meme frenzy starting this cycle. However, there are still lessons to be learned from Bitcoin’s price trend. Based on on-chain data, the BTC top-bottom cycle price constructed by 0xCryptoChan using coin-days destroyed, total circulation, and realized price shows that BTC has been in Phase 3 for about 4 months. In the 2012-2013 cycle, BTC remained in Phase 3 for about 7 months, while in the 2016-2017 cycle, BTC stayed in Phase 3 for about 11 months. In the 2020 cycle, BTC has been in Phase 3 for about 4.5 months.
Furthermore, currently, BTC on-chain veterans have distributed their chips to 40.6%. During previous bull market peaks, veterans distributed their chips to as low as 10.4% or even lower. The black line in the chart represents BTC price, and the bars represent the percentage of BTC that hasn’t moved for more than a year out of the total supply. The weighted average of the BTC’s total cost value of each age group is used to eliminate the problem of ancient whale chips accounting for a large proportion of the present.
In conclusion, from a technical analysis perspective, Bitcoin is currently facing resistance on the upside, but it has found short-term support on the M5 and MA13 moving averages. Considering the weakened inflow of funds into the Bitcoin ETF and the possible delay of the Federal Reserve’s rate cut, Bitcoin is expected to continue its range-bound trading in the short term. However, with the upcoming halving event, there is a continuous inflow of funds into the Bitcoin ecosystem, especially in the past week, indicating relatively high inflow volume. According to Defillama data, the Bitcoin ecosystem has seen a 66.58% inflow in the past week. Several well-known projects in the Bitcoin ecosystem have also chosen to launch after the halving event. Overall, there are signs of short-term strength in Bitcoin, and it is expected to have a breakthrough around the halving event. In the medium term, with the selling off of Bitcoin whales, the slowdown in Bitcoin ETF inflows, and the delayed expectation of a rate cut by the Federal Reserve, it is highly probable that Bitcoin will experience consolidation after a high point is reached around the halving event.
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Author: Bitpush Asher Zhang
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Tags:
2023 market trends
ETF
Bitcoin
Halving cycle
Whales
Institutions
Bull market
Federal Reserve
Market trends
Note: All Bitpush articles represent the views of the authors and do not constitute investment advice.