Bitcoin Surges 21%, Reaching $52,000: ETF Demand Bolsters Bullish Trend
Summary:
Bitcoin has surged by 21% over the past week, hitting $52,000 for the first time since December 2021. The increase is largely credited to rising inflow into Bitcoin spot exchange-traded funds (ETF), suggesting over-the-counter (OTC) desks might be low on reserves,, leading to spot buying on exchanges. If this trend persists, Bitcoin could rise above $55,000. Despite short-term Bitcoin holders swiftly sending coins to exchanges, long-term holders are less likely to sell, assuring strong support for further gains above $52,000.
The price of Bitcoin (BTC) has experienced a 21% rise over the last week, achieving a value of $52,000 for the first time since December 2021. The main driver behind this price surge is believed to be the increased influx into Bitcoin spot exchange-traded funds (ETF), which peaked at $631.3 million on 13th February. Current market speculations suggest that over-the-counter (OTC) trading desks might be running low on coin reserves, causing them to resort to spot purchasing on traditional exchanges, consequently creating a market imbalance in favor of a bullish trend.
This hypothesis might be believable yet misleading. Glassnode's on-chain data reveals a drop in the supply of short-term holders. If this trend continues, Bitcoin could potentially surpass $55,000. However, it's vital to clear a common misconception: that arbitrage desks are always net long, thus impacting the price. They often hedge their significant spot market positions with derivative contracts. Moreover, an OTC deal doesn't always require a buyer and a seller, as intermediaries could rely on regular exchanges' order books and future contracts. So, whether an arbitrage desk routinely transfers coins doesn't necessarily impact price dynamics.
Consequently, if $1.84 billion of Bitcoin was indeed added by Bitcoin spot ETF issuers over the week, the same amount must have been sold by others. Determination on both buy and sell sides plays a crucial role in forming the price. Long-term holders (those holding their coins for over six months) are less likely to sell after a price surge. Relying on on-chain analysis could help track these trends and the market's resilience during fluctuations.
Data suggests that, over the last week, short-term holders (funded less than six months ago) have significantly increased transactions to exchanges, averaging 49,504 BTC per day, while long-term holders only sent 2,023 BTC per day in the same period. While long-term holders account for 79% of the supply, rapid sell-offs remain a probability.
Addresses with less than 100 BTC were the main sellers in the past week. It's plausible that the 'Bitcoin whales,' who bought Bitcoin anticipating the launch of spot ETFs, are now on the selling side, making it difficult to attain higher breakthroughs. However, data proves this isn't the case.
In the past seven days, every type of holder, except for those with more than 100 BTC (primarily institutions), was a net seller. These investors added 20,168 BTC, valued at over $1 billion, which can be attributed to Bitcoin spot ETF issuers like BlackRock, Fidelity, BitWise, Ark 21Shares and more. Although its sustainability is questionable, data shows that ETF products see a demand surge as the Bitcoin price rises, supporting a bullish trend.
This data concludes that a rally above $55,000 isn't just reliant on retail flow. As a result, conventional indicators like Google search trends or the "Fear and Greed Index" might not effectively reflect institutional investors' appetite for Bitcoin. Currently, short-term Bitcoin holders are hastily moving coins to exchanges even as the price has moved from $42,900 to $52,000 in a week (+21%). If long-term holders do not reduce their positions after reaching a certain price, all signs suggest a dwindling supply side, possibly leading to further gains above $52,000.
Investors and traders should note that this article doesn't provide investment advice or recommendations. Investing and trading always carry risks, and appropriate research should be done before making any decision.
Published At
2/14/2024 10:30:00 PM
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