Research Summary

The report analyzes the Bitcoin market’s resilience, focusing on the impact of the Grayscale Bitcoin Trust (GBTC) conversion and the approval of Bitcoin ETFs. It examines the Bitcoin price performance, the GBTC overhang, and the behavior of long-term Bitcoin investors. The report also explores on-chain and exchange activity, highlighting the growing presence of institutional investors.

Key Takeaways

Bitcoin’s Resilient Performance

  • Bitcoin’s Recovery: Despite a slower recovery compared to previous cycles, Bitcoin’s price performance since the 2022 lows shows a more resilient pattern. The largest drawdown in the current cycle was -20.1% in August 2023, indicating a heightened level of resilience.
  • Impact of GBTC Overhang: The GBTC conversion has led to significant capital outflows, creating a supply overhang. This has resulted in a slower recovery pace for the Realized Cap, which remains just -5.4% shy of its previous ATH of $467B.

Long-Term Investor Behavior

  • HODLers’ Steadfastness: Despite market fluctuations, the majority of long-term Bitcoin investors remain unwilling to part with their coins. The percentage of held supply across multiple age bands is just below ATHs, indicating a strong holding sentiment.
  • Active Supply Increase: The report notes the first signs of a potential closing of the divergence between “Stored Supply” and “Active Supply”, with a notable increase in “Active Supply”. This suggests an uptick in older coin spending.

On-chain and Exchange Activity

  • Declining Active Entities: Despite strong price performance, the number of Active Entities has declined to cycle lows of 219K per day. This is largely due to the uptick in activity related to Ordinals and Inscriptions, where many participants are re-using Bitcoin addresses.
  • Robust Transfer Volumes: Transfer volumes remain robust with around $7.7B/day in economic volume processed. This divergence between ‘active entities’ and increasing transfer volumes suggests a growing presence of large size entities active in the market.

Actionable Insights

  • Monitor the GBTC Overhang: The GBTC conversion has created a significant supply overhang, impacting the Bitcoin market. Stakeholders should closely monitor this situation as it could influence future market dynamics.
  • Understand Long-Term Investor Behavior: The steadfastness of long-term Bitcoin investors, or HODLers, indicates a strong holding sentiment. Understanding this behavior could provide insights into market stability and potential future price movements.
  • Assess On-chain and Exchange Activity: The divergence between declining active entities and robust transfer volumes suggests a growing presence of large size entities in the market. Stakeholders should assess this activity to understand the role of institutional investors and large capital flows in the Bitcoin market.

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