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In the last two years, Bitcoin (BTC) has reached a peak of $50,368 and is currently finding buyers at about $1,000 below this level. Despite rapid sales, the long tail in the daily candle suggests that buyers are stepping in at lower levels. So, what’s next for cryptocurrencies? Is the recent demand wave enough to sustain the rally? Or is it setting the stage for larger sell-offs by accumulating buyer liquidity?
Cryptocurrency Commentary
For the first time since December 2021, the Bitcoin price surpassed $50,000, rising by approximately 15% in February. The reason for the fluctuations in the last 24 hours was US data that undercut optimism on the macroeconomic front. As we discussed hours ago, the Fed is expected to make a 75bp cut by 2024, and data and statements suggest this could happen. Markets were certain weeks ago that the first cut would come in March and that there would be a 150bp reduction by the end of the year.
In other words, the excessive optimism in the market is being tempered as we have seen several times over the last two years, causing volatility in risk markets.
Glassnode Commentary
Although 2024 started with excitement, data from Glassnode indicates that the market is preparing for an upward transition phase. According to the report, long-term Bitcoin holders have spent 300,000 BTC since November. Bitcoin has only closed above $50,200 for 141 days since 2021.
This means that only a small number of investors will incur losses when selling at current prices. The UTXO ratio has reached 96.62%, indicating that profitable investors represent a very large group. However, their profit-taking sales could intensify during the transition period. Indeed, there was a similar outlook before the drop on January 12th.
However, we will also see a period when long-term investors sell more to short-term traders and the price continues to rise. According to historical data, the current concern is that many more investors need to enter the market during the price increase phase. This represents the days when your grocer, fruit vendor, and barber start talking about cryptocurrencies again. With the return of former investors who have ignored crypto in the last two years and newcomers hearing about it for the first time, fresh blood will be injected into the markets.
Spot Bitcoin ETFs
Spot Bitcoin ETF inflows are at a satisfying level. According to Senior ETF Analyst Eric Balchunas, net cumulative flows for 10 ETFs have exceeded $3 billion. The CoinShares report states that the cumulative asset amount of crypto funds has reached $59 billion.
The Coinbase premium is rising again, and demand from the US is quite strong. GBTC sales have dropped to negligible levels, and just days ago, the issuer reserve excluding GBTC surpassed $10 billion. All these factors lay the foundation for the ETF-supported 2024 rise narrative. Supportive factors such as halving and interest rate cuts have the potential to increase the magnitude of the rise.
