Market Analysis with Mike Ermolaev
Welcome to the 23rd installment of GoMarket Weekly with our expert analyst, Mike Ermolaev, who brings GoMining enthusiasts face-to-face with the big picture of the crypto market while cutting through the noise. In this edition, we’ll examine increased long-term Bitcoin hodling activity and exchange reserve moves. We’ll also take a look at institutional investors flexing their muscles and see how that affects the market dynamics. Also, we'll explore the current stablecoin market conditions to see whether these assets can truly live up to their name and be the steady hand for the market as originally intended.
Bitcoin Long-Term Holders Reclaim Momentum
Over the past 7 days, Bitcoin's price has fluctuated within a range of $56,765 to $61,356, reflecting the market's ongoing volatility. However, despite the sharp downturn at the start of August, long-term Bitcoin holders have started accumulating coins once again.
According to Glassnode analysts, this trend is particularly evident among large wallet holders, often associated with institutional investments like ETFs. In fact, the Accumulation Trend Score (ATS) metric, which measures market-wide accumulation behavior, has reached its highest possible value of 1.0, indicating significant accumulation throughout the last month. After months of distribution pressures, it seems that a sudden shift has thrown the market a lifeline.
Source: Glassnode
Moreover, the Long-Term Holder (LTH) cohort, which had heavily divested during the lead-up to Bitcoin's all-time high (ATH), is now returning to a HODLing strategy. Over the past three months, a total of 374,000 BTC has migrated into LTH status, showcasing a clear preference among these investors to hold onto their coins rather than spend them. This behavior is further supported by the 7-day change in LTH supply, which has shifted back to positive territory, suggesting that long-term holders are once again accumulating rather than distributing.
Source: Glassnode
Despite challenges, the behavior of long-term holders suggests a high level of conviction in Bitcoin's future potential. The percentage of network wealth held by this cohort remains elevated compared to previous cycle ATH breaks, and the LTH Sell-Side Risk Ratio remains low, indicating that these investors are not eager to sell at current price levels.
Exchange Reserves Dwindle
The ongoing depletion of Bitcoin reserves on centralized exchanges, as illustrated by the recent data, ties directly into the broader market behavior highlighted in the Glassnode analysis. As exchange reserves continue to decline—from over 3 million BTC at the beginning of the year to 2.73 million BTC in mid-July to approximately 2.67 million BTC currently—this mirrors the trend of long-term holders increasingly moving their Bitcoin off exchanges into more secure, long-term storage.
Source: CryptoQuant
As more Bitcoin is moved off exchanges and held by long-term investors, the available supply on the market becomes increasingly limited. On the surface, Bitcoin appears to be stuck in a rut. However, if you look closer, you'll find that long-term holders are engaged in a slow and steady grind, quietly reconfiguring the market's underlying dynamics.
Institutional Confidence in Bitcoin Grows as Saylor and Metaplanet Expand Holdings
Institutional investment in Bitcoin continues to be strong, and Michael Saylor's announcement of a $1 billion-plus holding has made headlines. In a recent Bloomberg interview, Saylor, the executive chairman and co-founder of MicroStrategy, disclosed that he personally owns at least 17,732 Bitcoin, currently valued at approximately $1 billion. He appears to be a true believer in Bitcoin's potential, stressing that he has not sold any of his holdings and continues to acquire more, describing Bitcoin as "a great capital investment asset for an individual, a family, an institution, a corporation, or a country."
Highlighting U.S. Senator Cynthia Lummis's proposed legislation to establish a U.S. Strategic Bitcoin Reserve, which aims to accumulate up to 1 million BTC over time, Saylor underscored the growing recognition of Bitcoin's value at the highest levels of government.
In addition to Saylor's substantial holdings, the Japanese public company Metaplanet recently acquired an additional 57.103 BTC at an average purchase price of 8,756,107 yen per Bitcoin, equivalent to roughly $60,000 at current exchange rates. This acquisition was part of a larger purchase totaling 500 million yen (approximately $3.3 million). With this purchase, Metaplanet's total Bitcoin holdings now stand at 303.095 BTC, with an aggregated purchase amount of 2.95 billion yen (approximately $19.8 million), bringing the company's average purchase price to 9,732,933 yen per Bitcoin.
Bitcoin's Path to $100K Boosted by Treasury Liquidity Injection
Arthur Hayes, co-founder of BitMEX, has predicted that Bitcoin could reach $100,000 by the end of the year. In our previous edition, we highlighted Hayes's belief that ongoing inflationary policies would benefit Bitcoin regardless of the U.S. election outcome. Now, he extends his forecast in his latest essay, suggesting that the U.S. Treasury's massive T-bill issuance will be a key driver in pushing Bitcoin to $100K by year-end.
He explains that as the U.S. Treasury issues more T-bills, it will effectively drain funds from the Fed's RRP program, which currently holds large amounts of sterilized money that cannot circulate in the financial markets. By persuading money market funds (MMFs) and banks to pivot into T-bills, the Treasury is poised to supercharge dormant liquidity.
Hayes also notes that this strategy is part of a broader effort by U.S. Treasury Secretary Janet Yellen to sustain nominal GDP growth and reduce the U.S. debt-to-GDP ratio, even if it leads to persistently high inflation. If Hayes's predictions hold true, the additional $301 billion to $1.05 trillion in liquidity expected to be injected into the financial markets by year-end could create a bullish environment for Bitcoin and other risk assets, driving prices upward. As the tides of the macroeconomic environment change, Bitcoin stands to gain the most, according to Hayes.
Strong Inflows Highlight Investor Confidence in Bitcoin and Ethereum ETFs
During the period from August 9 to August 16, 2024, data from Farside Investors revealed that while Bitcoin ETFs experienced some challenges, there were notable inflows that underscored continued investor interest. Blackrock led the inflows with a significant addition of $157.6 million on August 8, followed by Fidelity, which contributed $65.2 million.
However, these gains were tempered by substantial outflows from other funds, particularly Grayscale’s GBTC, which recorded a cumulative outflow of $291 million during the same period. Despite this, the overall trend of inflows from major players like Blackrock and Fidelity suggests that while investors are taking profits or reallocating, there is still a strong belief in Bitcoin’s long-term potential. The total net outflow for Bitcoin ETFs during this period amounted to $93.2 million, reflecting a market in transition, with significant repositioning by institutional investors.
Source: Farside Investors
Meanwhile, Ethereum ETFs showed a mixed but somewhat resilient performance during the period from August 9 to August 16. Blackrock led the inflows with $49.1 million on August 13, followed by smaller but steady contributions from Fidelity and Bitwise, with inflows of $16.1 million and $6.6 million respectively. These inflows demonstrate continued investor confidence in Ethereum, despite some volatility. However, these positive movements were again countered by significant outflows from Grayscale’s ETHE, which saw a cumulative outflow of $135 million during the same period. This resulted in a net outflow of $19.6 million for Ethereum ETFs, indicating a cautious yet ongoing interest in the asset.
Source: Farside Investors
Stablecoin Inflows Boost Bitcoin Prospects Despite Regulatory Challenges
Meanwhile, analysts at 10x Research believe that the issuance of stablecoins could be a key driver of the next Bitcoin rally. Over the past week, major issuers like Tether and Circle have released stablecoins worth approximately $2.8 billion, signaling new capital entering the market. Notably, Tether recently minted $1 billion in USDT, though it appears to be inventory building rather than immediate issuance. However, if this trend of stablecoin issuance continues, it could provide the necessary liquidity to propel Bitcoin higher, especially if the cryptocurrency can maintain levels above $60,000. The analysts caution that while Bitcoin’s outlook is promising, without sustained inflows of stablecoins, the momentum could falter, leading to a potential loss of upward momentum. The $2.5 billion stablecoin inflow currently observed is seen as a critical factor in driving future price action in Bitcoin and other cryptocurrencies.
However, this influx of stablecoins, comes at a time when regulatory pressures are mounting, particularly in the European Union. Paolo Ardoino, Tether's CEO, is sounding the alarm over the newly introduced Markets in Crypto-Assets regulation, claiming it's a ticking time bomb for stablecoins and the entire banking system. The MiCA regulation mandates that at least 60% of reserves backing stablecoins must be held in EU bank accounts, a requirement that Ardoino believes could exacerbate the vulnerability of financial institutions operating under fractional reserve banking. He pointed to the 2023 collapse of Silicon Valley Bank, which triggered a depegging crisis for USD Coin, as a cautionary example of the risks posed by such regulations.
Lagos Tokenizes Real Estate, Norway Expands Bitcoin Holdings
In other global developments, the government of Lagos, Nigeria’s largest city, is planning to tokenize real estate using blockchain technology. Over the next 16 months, the Lagos State Ministry of Science and Technology will lead this initiative with a 500 million naira (approximately $314,465) budget. The project seeks to boost internally generated revenue by attracting more investors and increasing property taxes and transaction fees, while also addressing issues like land title fraud and ownership transparency.
Meanwhile, the Norwegian Sovereign Wealth Fund (NBIM), the world’s largest with assets totaling $1.7 trillion, has seen its indirect Bitcoin holdings surge by 62% in the first half of 2024, now holding 2,446 BTC through investments in companies like MicroStrategy, Marathon Digital, Coinbase, and Block Inc. This marks an increase of 938 BTC since December 2023 when it held 1,507 BTC. The fund's stake in MicroStrategy rose from 0.67% to 0.89%, as MicroStrategy itself increased its Bitcoin holdings significantly. Additionally, NBIM’s shares in Coinbase grew from 0.49% to 0.83%, in Block Inc from 1.09% to 1.28%, and it added a 0.82% position in Marathon Digital.
With these developments, both in Lagos's push for blockchain innovation and the Norwegian Sovereign Wealth Fund's increasing Bitcoin exposure, it's clear that traditional and emerging markets alike are recognizing the potential of digital assets as a viable addition to diversified investment strategies.
Bitcoin Mining Difficulty Drops Over 4%
On August 14, Bitcoin mining difficulty saw a significant decrease of over 4%, marking the seventh negative adjustment in 2024, with the current difficulty now standing at 86.87 trillion (T). This adjustment follows a drop in the network’s hash rate, which decreased from an all-time high of 670 exahashes per second (EH/s) to approximately 622 EH/s.
Source: Coinwarz
While transaction fees have reached cycle lows, exerting pressure on miners, the network continues to operate effectively, highlighting its enduring strength even in challenging conditions.
Closing Thoughts
Bitcoin's prospects are improving again, thanks in large part to loyal hodlers holding tight, heavy hitters like MicroStrategy’s Saylor and Metaplanet bulking up their stakes, and a flood of stablecoins setting the stage for a major comeback. The Bitcoin market is still standing, adapting to the shifting landscape and finding new ways to thrive – like Lagos's bold foray into real estate tokenization or Norway's decision to bulk up its Bitcoin holdings.
Stay tuned for next week's GoMarket Weekly, where Mike Ermolaev will continue to serve up expert analysis and market guidance that matters.
