Bitcoin bulls need $55k as short-term supply shrinks
The price of Bitcoin (BTC) has increased by 21% in the last 7 days, reaching $52,000 for the first time since December 2021. On February 13, $631.3 million was used to stimulate bullion by assuming that traders had exhausted their stocks of coins from over-the-counter (OTC) desks to make purchases on regular exchanges and create imbalances.
While such a hypothesis is easy to believe and somewhat misleading, data from Glassnode on the chain shows that the supply of short-term holders has decreased, and if conditions continue, the price of Bitcoin may rise above $55,000.
Short-term bitcoin holders are selling quickly.
It is important to dispel the misconception that arbitrage desks are always long (buyers), indicating that they have exposure to price direction. While having a significant market presence is critical to their business, it is often hedged through the use of derivative contracts. Similarly, not every OTC deal requires a buyer and a seller, as intermediaries have access to exchanges' order books and futures contracts to fulfill requests. In short, whether or not there is a ‘hold' where the arbitrage desk transfers coins immediately or not does not change the price volatility.
So, if spot Bitcoin ETF issuers added a net $1.84 billion in BTC last week, other entities should sell a similar amount. A critical question in pricing is how desperate each side is to close the deal. Long-term holders, addresses that haven't moved their coins for more than 6 months, are typically less likely to sell after a price rally. That's why analysts turn to chain analysis to gauge the strength and confidence of investors to provide a rough idea of how resilient the market may be in the face of disruptions.
According to data, short-term holders, whose addresses were funded more than 6 months ago, significantly increased their turnover by an average of 49,504 BTC per day last week. In comparison, long-term holders sent only 2,023 BTC per day during the same period, which suggests that the main selling parties are short-term holders. Although 79% of the supply is owned by long-term owners, potential sales can occur quickly.
Addresses with less than 100 BTC were net sellers in the last week.
However, one might argue that whales who bought Bitcoin in anticipation of the spot ETF's launch are currently active in the selloff, making it a challenge to make big gains. However, evidence shows that this is not the case.
Who sold all that bitcoin to the ETF yesterday? Little kids pic.twitter.com/q5IxdUxlBH
— HODL15Capital (@HODL15Capital) February 14, 2024
Notably, every holder was a net seller in the last 7 days, except for the very large whales who held more than 100 BTC, who probably represent institutions. These investors added a total of 20,168 BTC, worth more than $1 billion, which can be attributed to the exposure of Bitcoin ETF issuers such as BlackRock, Fidelity, BitWise, Ark 21Shares and others. While the sustainability of this income stream is uncertain, the data suggests that demand for ETF products is increasing as Bitcoin prices rally, providing strong support for bullish momentum.
Related: Bitcoin Breaks $1 Trillion Market Cap
This data confirms that the rally above $55,000 is not solely dependent on retail flows. Therefore, indicators that previously reflected results such as Google search trends or the “Fear and Greed Index” may not accurately reflect institutional investors' risk appetite and interest in Bitcoin.
While short-term bitcoin holders are quickly sending coins to exchanges, the price has risen from $42,900 to $52,000 in 7 days (+21%). Unless long-term holders decide to reduce their positions above a certain price level, all signs point to a weakened supply side, which means that the additional profit is above $52,000.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
