Article Title: Is Bitcoin Stuck in a Range or Will There Be a Breakout?
Author: Markus Thielen
Translation: Odaily Planet Daily
Market Status and Key Variables
Despite Bitcoin’s price currently being only 7% lower than its all-time high, traders are still complaining about its stagnant trend. A large amount of Bitcoin is being transferred out of exchanges, while stablecoin momentum is sending warning signals. The cryptocurrency market’s trading volume has decreased to $50 billion, and the funding rate is only slightly positive, indicating a lack of trading interest.
The Federal Reserve policy and inflation data are seen as the two key variables that could drive Bitcoin to reach a new all-time high.
On June 5th, the Bank of Canada may kickstart a global interest rate cut cycle, providing a reference for the Federal Reserve. On June 12th, the US inflation data needs to show a lower inflation rate of 3.3% for Bitcoin to potentially rise.
The chart below shows the Bitcoin funding rate (left axis, white) compared to cryptocurrency trading volume (right axis, purple, in billions of dollars):
Bitcoin Transfers and Exchange Dynamics
The sharp decline in the amount of Bitcoin held on exchanges indicates that whales are moving their Bitcoin out of exchanges to “hodl” when they expect the price to rise.
In May, a total of 88,000 Bitcoins were transferred out of exchanges, leaving only 2.5 million remaining, the lowest since March 2018. The outflow of Bitcoin from exchanges began on May 15th, coinciding with the 45-day period after the end of the quarter when US registered investment managers had to file their 13F reports for holdings exceeding $100 million.
Coinbase accounted for one-third of these outflows (29,000 Bitcoins), and seven out of the top ten exchanges showed outflows, with only Bitfinex experiencing strong inflows (7,600 Bitcoins). At the end of May, 50,000 Bitcoins were transferred out of exchanges. These data points are bullish, and on May 27th, the hash rate reached a new all-time high of 657m TH/s (slightly declining to 602m TH/s afterwards), indicating that some mining activities are still bullish.
Miners and Whales Behavior Analysis
Starting from November 2023 (when Bitcoin was approaching $40,000), the balance of Bitcoin in miner wallets gradually decreased from 1.835 million BTC to 1.806 million BTC until the halving on April 20th, stabilizing for a few weeks.
However, in the past two weeks, the decline in the balance has increased as the reduction in block rewards forces miners to sell inventory to cover operational costs. Currently, Bitcoin miner wallets hold 1.804 million BTC, and miners continue to sell Bitcoin.
In May, whales (holding >10,000 BTC) increased their holdings by 164,000 BTC, the highest monthly increase since January 2018 (the peak of the third bull market). Sharks (holding 100-1,000 BTC), on the other hand, sold 118,000 BTC, the largest sell-off since December 2022 (close to the low point). Sharks sold a large amount (165,000 BTC) in February 2024 but bought a large amount (159,000 BTC) in March 2024. The accumulation of giant whales and the movement of tokens from exchanges are bullish signs for Bitcoin.
Stablecoin Issuance and Market Liquidity
Taking a look at the distribution of the 19.7 million circulating Bitcoins: 1.77 million are possibly lost (relatively stable since 2013), whales hold 3.12 million BTC (the highest level since November 2022), sharks hold 4.8 million BTC, fish (holding 10-100 BTC) hold 2.57 million BTC, crabs (holding 1-10 BTC) hold 2.13 million BTC, and shrimps (holding <1 BTC) hold 1.42 million BTC. This suggests that Bitcoin holders with at least 100 BTC (sharks) dominate the market, but whales (at least 1,000 BTC) are the largest category of holders. The total value of issued stablecoins is nearly $140 billion, and wallets holding over $10 million account for over 50% of this, indicating that large investors, rather than retail traders, are driving the stablecoin (or overall cryptocurrency) market. However, two days after the Bitcoin halving, when the fees for Runes transactions reached their peak, the stablecoin balance held by whales (holding >$10 million) decreased from $76 billion to $72 billion.
Wallet holdings have stabilized and fluctuated slightly. Therefore, the peak of stablecoin holdings by whales on April 22nd, 2024, could be a key turning point, indicating that large investors are either converting their stablecoins into cryptocurrencies or into fiat currencies. However, the influx of new fiat money into cryptocurrencies has stopped, which is concerning as it has been a key driving factor for Bitcoin’s rise from $30,000 to $70,000.
The chart below shows Bitcoin (left axis, purple) compared to stablecoin impulses in the past 30 days (right axis, white, in billions of dollars):
In the past 30 days, only $400 million of net stablecoin issuance has been disclosed, which is concerning as the more positive stablecoin supply momentum has disappeared since September 2023 when Grayscale won the lawsuit against the SEC.
Smaller wallets (holding less than $1 million) are still increasing their stablecoin holdings, either through new conversions from fiat to cryptocurrencies or more likely by converting their cryptocurrency holdings into stablecoins (taking profits or stop losses).
Conclusion
In conclusion, while smaller wallets are still increasing their stablecoin holdings, whales are quietly becoming less active and converting their stablecoins into cryptocurrencies (such as BTC) or fiat currencies (cashing out). The purchase of Bitcoin by whales coincided with the large-scale stablecoin minting in April/May. The minting has now paused, and Bitcoin is being transferred out of exchanges.
This makes macroeconomic momentum a key variable. The market either needs the Federal Reserve to cut interest rates (unlikely, but the June 5th Bank of Canada meeting may provide early signals) or for the June 12th inflation data to be lower (we believe it could be around 3.3%), which would at least cause members of the Federal Reserve to turn more dovish. Otherwise, Bitcoin may remain in a range of $60,000 to $73,000.
