Following Bitcoin’s historic high of $73,000, a significant decrease in selling pressure is evident as long-term holders begin reallocating their Bitcoin assets.
Currently, Bitcoin’s price continues to consolidate below its historical peak, and long-term investors are starting to accumulate Bitcoin assets for the first time since December 2023. Meanwhile, the approval and listing of the first Ethereum spot ETF in the United States have led to a 20% increase in the price of Ethereum.
Summary
Despite minor fluctuations in the prices of Bitcoin and Ethereum since March, both assets have shown relative strength after a period of long-term consolidation following historic price peaks.
The approval of the Ethereum spot ETF by the U.S. Securities and Exchange Commission (SEC) came as a surprise to the market, resulting in over a 20% increase in the price of ETH.
Net flows of the U.S. Bitcoin spot ETF turned positive again after four weeks of net outflows, indicating a resurgence in demand from the traditional financial sector.
Selling pressure from long-term holders has significantly decreased, and investor behavior is shifting back to asset accumulation, suggesting the market needs higher volatility to drive the next wave.
Building Momentum
After hitting a low point (-20.3%) following the FTX crash, the price of Bitcoin began to climb back towards its historical highs, reaching $71,000 on May 20th. The retracement pattern during the upward trend of 2023-24 seems similar to the retracements seen during the bull market of 2015-17.
The upward trend of 2015-17 occurred in the early stages of Bitcoin when the asset class lacked available derivative instruments for analysis. Comparing this to the current market structure, the analysis suggests that the 2023-24 upward trend is primarily being driven by the spot market. The launch of the U.S. spot ETF and the influx of funds provide evidence for this conclusion.
Image one: Bitcoin Bull Market Adjustment Retracement
Since the low point following the FTX crash, the adjustments in Ethereum have been significantly smaller compared to previous cycles. This market structure indicates increased resilience between consecutive corrections, with a decrease in downward volatility.
However, it is worth noting that Ethereum’s recovery rate is slower compared to Bitcoin. Over the past two years, ETH’s performance has been notably weak compared to other top crypto assets, mainly reflected in the relatively weaker ETH/BTC ratio.
Although unexpected in a broad sense, the approval of the U.S. Ethereum spot ETF may serve as a necessary catalyst to strengthen the ETH/BTC ratio.
Image two: Ethereum Bull Market Adjustment Retracement
Analyzing Bitcoin’s market performance on a weekly, monthly, and quarterly basis shows strong overall performance, with gains of 3.3%, 7.4%, and 25.6%, respectively.
To highlight periods of particularly strong price performance, we can calculate the number of trading days within a 90-day window where all three time scales saw gains of over 20%. So far, only five days met this threshold last quarter.
In previous cycles, this number typically ranged from 18 to 26, indicating that the current market may be more cautious compared to historical bull markets.
Image three: Bitcoin Quarterly, Monthly, and Weekly Market Performance (Historical Analysis)
A similar evaluation can be made for Ethereum, where the approval of the Ethereum ETF had a significant impact, leading to buyer pressure and price movements exceeding 20% across all three time scales for the first time since late 2021.
Image four: Ethereum Quarterly, Monthly, and Weekly Market Performance (Historical Analysis)
ETF Buyers Return
In early March, Bitcoin broke through a new high of $73,000, while at the same time, supply from long-term holders flooded the market as they sold off a significant amount of their holdings. This selling pressure created an oversupply, resulting in a period of price correction and consolidation. Over time, the lower Bitcoin prices and the exhaustion of selling potential among sellers shifted towards asset accumulation.
This shift can be seen in the flows of Bitcoin ETFs – the funds of Bitcoin ETFs turned into net outflows throughout April. As the market sell-off drove Bitcoin prices down to around $57,500, ETFs experienced daily net outflows as high as $148 million. However, this was proven to be a short-term confidence collapse, followed by a sharp reversal in market trends.
In the second-to-last week of May, Bitcoin ETFs experienced massive daily net inflows of $242 million, indicating a return of buyer demand. Considering that natural selling pressure from miners post-halving is $32 million per day, the buying pressure from this ETF almost soared to 8 times the original amount. This highlights the significant impact and volume that Bitcoin ETFs bring, while also showing that the impact of the halving event is relatively minor.
Image five: Bitcoin ETF Flow & Net Inflows on Exchanges (7-day moving average)
Return to Optimism Phase
The percentage of circulating supply in profit provides valuable information about each market cycle and a set of recurring patterns. In the early stages of a bull market, when prices attempt to revisit previous historical highs, the supply percentage in profit typically exceeds around 90%. Breaking this statistical threshold marks the beginning of the market’s return to optimism phase, attracting investors to take profits off the table historically.
During this phase, selling pressure in the market usually comes from long-term holders – they seize the opportunity to sell assets at high prices and seek profit-taking, especially after enduring the downward fluctuations of the entire bear market, making the impulse to sell assets at this stage particularly strong.
As new price discovery is completed and Bitcoin prices break new historical highs, the market enters the optimism phase, where profit supply fluctuates around 90% over the next 6-12 months. The current market is still in the early stages of the optimism phase but has been active for about 2.5 months. At the time of writing, 93.4% of Bitcoin assets in the market supply are in a profitable state.
Image six: Bitcoin Supply in Profit
Another tool to monitor corrections is the scale of investors’ unrealized losses. Given that unrealized losses near historical price peaks represent “local top buyers”, we can assess the percentage of supply assets falling into a 90-day loss rolling window. The goal is to evaluate the percentage of Bitcoin assets transitioning from profit to loss compared to local price peaks.
These deep retracements technically occur as new capital enters the Bitcoin network, absorbing buying pressure from investors reallocating their assets during the uptrend, which then falls into losses during the subsequent price adjustment.
The depth of retracements during the current upward trend is also similar to the 2015-2017 bull market, once again demonstrating the market’s relative strength. This also indicates that, despite Bitcoin’s local price peaks being refreshed, investors do not seem to be buying too many Bitcoin assets at overly high prices.
Image seven: Bitcoin Supply in Profit Quarterly Retracement
“Strong Hands” Dominating the Market
With prices rising due to new buying pressure, the importance of selling pressure from long-term holders increases. Therefore, we can measure the reasons stimulating them to sell assets and assess the actual situation of sellers by evaluating the unrealized profits of the long-term holder group.
Firstly, the MVRV ratio of long-term holders reflects the average multiple of their unrealized profits. Historically, during the transition phases between bear and bull markets, long-term holders’ trading profits were above 1.5 but below 3.5 and could sustain for one to two years.
If the upward trend in the market continues, eventually forming new historical price peaks, the unrealized profits of long-term holders will expand. This will significantly increase their desire to sell, leading to a certain level of selling pressure and gradually depleting the demand present in the market.
Image eight: Bitcoin Long-Term Holder MVRV
As a summary of this analysis, we evaluate the spending rate of long-term holders through the 30-day net position change in supply from long-term holders. In March, as Bitcoin surged towards a new historical high, the market experienced a major asset reallocation from long-term holders for the first time.
In the past two bull markets, the net allocation rate of long-term holders reached from 836,000 to 971,000 Bitcoin per month. Currently, the peak net selling pressure from them reached 519,000 Bitcoin per month at the end of March, with around 20% coming from Grayscale ETF holders.
Following this period of “extravagance”, the market entered a calm phase, with local accumulation of assets leading to a monthly growth of around 12,000 Bitcoin from long-term holders.
Image nine: Long-Term Holder and Grayscale ETF Holdings Change
Conclusion
After Bitcoin reached a historical high of $73,000, a significant decrease in selling pressure is evident as long-term holders begin reallocating their Bitcoin assets. Subsequently, long-term holders have started to accumulate Bitcoin for the first time since December 2023. In addition, the demand for spot Bitcoin ETFs in the market has significantly increased, resulting in positive fund inflows and reflecting immense buyer pressure.
Furthermore, with the SEC approving the U.S. Ethereum spot ETF, the competitive environment between Bitcoin and Ethereum has become balanced. This deepens the presence of digital assets throughout the traditional financial system, marking an important step forward for the industry.
