Bitcoin has corrected over the past week and now holds a critical support line at $30,806. This could be the last major support zone and bulls must hold it to prevent more downside.
In the crypto market, fear and uncertainty reign supreme, as traders and investors are unable to predict future price actions.
Analyst Checkmate has presented the two sides of the coin in a report for Glassnode Insights. In a sea of bulls and bears, the analyst tried to find a balance.
In favor of the bulls, the analyst believes that long-term Bitcoin investors have shown resilience in the current market condition. Thus, he believes that investors have shown a buying behavior similar to a “dollar cost average style accumulation”.
Contrary to popular belief, on-chain data not only suggest a preference to hold BTC by long-term investors but there has also been a spike in potential new owners, as seen below in pink. In consequence, the Net Entities Growth has seen more entities created than destroyed, this is depicted in blue below.
To support his thesis, Checkmate presents the Exchange Net Position Change across all exchange platforms. In the chart, this metric suggests an increase in Bitcoin outflows from these platforms which stands at around $36,300 BTC/month.
There is a correlation between BTC outflows or inflows, the chart displays a bearish scenario during May and June 2021 as the latter increase. Thus, creating more selling pressure for Bitcoin’s price. The metric seems to be reverting, but its impact on the market is not immediate.
There could be a long period of accumulation before, similar to September and October 2020, before Bitcoin tries to reclaim previous highs. The analyst added:
HODLing appears to be the preferred strategy. Long-Term Holders currently hold 75% of the circulating supply (6% at a loss, 69% in profit). If the current rate of coin maturation (14.75k BTC/day) persists, LTHs (Long term holders) would hold 80% of the coin supply in around 2-months (…)
Institutional Investors Nowhere To Be Found As Bitcoin Trends Lower
Bitcoin has been testing its current support levels for multiple weeks. So far, it has managed to make a strong push back after touching its yearly open at around $29,000.
However, there seems to be a missing component to the bullish market structure: institutional demand. When MicroStrategy, PayPal, and Square integrated Bitcoin into their business model, the market experienced a boom that led to new all-time highs.
A similar effect occurred when Tesla bought BTC in mid-February pushing BTC’s price from $38,000 to its all-time high at around $64,000.
Now, institutional investment products based in BTC are underperforming with the Grayscale Bitcoin Trust (GBTC) trading at a discount for several months. The analyst believes that this indicates a “lackluster” in demand which can inspire more capital to turn away from the crypto market.
Canada’s BTC Exchange Traded Fund (ETF) has also experienced a slow-down along with over-the-counter (OTC) deals. This mechanism has been a favorite amongst institutions looking to enter the market and have been on a decline, as seen below:
Last on the institutional demand side, OTC desk holdings have seen a net inflow of around 1,780 BTC over the last two weeks, moving against the structural trend of outflows in place since November 2020.