Cointime

Download App
iOS & Android

Digesting the GBTC Overhang

Validated Project

From Glassnode, UkuriaOC

Executive Summary

  • Bitcoin price performance since the 2022 lows shows striking similarity to prior cycles, albeit recovering somewhat slower, but in a more resilient manner.
  • Despite a modest uptick in older coin spending following ETF approvals, the majority of long-term Bitcoin investors remain unwilling to part with their coins at current prices.
  • Network activity remains low in terms of entities, but monetary volume transferred on-chain, and specifically to exchanges remains robust, and resembles prior bull market cycles.

💡Live charts are available within The Week On-chain dashboard.

Cycle Positioning

The first chart assesses BTC price performance since the previous ATH. In this instance, we consider April 2021 (the Coinbase direct listing) as the ATH for a better read on duration, since we argue that was the peak in terms of investor sentiment (WoC -4-2022).

The notion of history rhyming rings strikingly true, with the last 3 cycles experiencing eerily similar performance. Our current cycle remains marginally ahead of both the 2016-17 and 2019-20 periods, due in part to an extremely strong year in 2023.

🔴 Cycle 2: 45.7% below ATH

🔵 Cycle 3: 43.6% below ATH

⚫ Current Cycle: 37.3% below ATH

Live Workbench

However, a heightened level of resilience can be noted across our current cycle, with corrections from the local high remaining relatively shallow. The largest drawdown thus far has been -20.1% set in August 2023.

This insight becomes increasingly pronounced when we count the proportion of days which traded at a deeper correction by comparison:

🟠 Genesis to 2011: 164-of-294 days (55.7%)

🔴 2011 to 2013: 352-of-741 days (47.5%)

🔵 2015 to 2017: 222-of-1066 days (20.8%)

🟢 2018 to 2021: 514-of-1056 days (48.7%)

Live Workbench

Despite this resilience, price momentum has been to the downside over recent weeks, as the market digests the new dynamics of the spot ETFs.

Here, we consult two key on-chain levels:

  • 🔴 Short-Term Holder Cost Basis ($38.3k), describing the average acquisition price of new demand.
  • 🔵 True Market Mean Price ($33.3k), a cost basis model for active investors.

Retests of the STH Cost basis as support are typical during market uptrends, however, a decisive loss of this level would bring the True Market Mean into consideration. The True Market Mean Price is very much a ‘centroid’ of the Bitcoin market, often distinguishing bull markets, from bear markets.

Live Workbench

Recovery Meets the GBTC Overhang

We can assess both the severity of capital outflows across cycles, as well as the recovery duration by utilzing the fundamental Realized Cap metric.

The Realized Cap remains just -5.4% shy of its previous ATH of $467B, and is currently experiencing strong capital inflows. That said, the duration for this recovery to accelerate has been markedly slower than prior cycles, arguably due to the significant supply overhang from challenging trades like the GBTC arbitrage.

The current cycle has seen the Realized Cap recover at the slowest pace on record

  • 🥇 2012-13 Cycle 0.22% per day
  • 🥉 2015-16 Cycle: 0.09% per Day
  • 🥈 2019-20 Cycle: 0.17% per Day
  • 🐢 2023-24 Cycle: 0.05% per Day

Live Workbench

This phenomena can in part be attributed to the significant redemptions taking place from the Grayscale GBTC product. As a closed end trust fund, GBTC amassed an extraordinary 661.7k BTC in early 2021, as traders sought to close the NAV premium arbitrage.

After many years of trading at a severe NAV discount (with a very high 2% fee), conversion to a spot ETF has triggered significant a re-balancing event. Around ~115.6k BTC have been redeemed from the GBTC ETF since conversion, creating significant market headwinds.

Live Workbench

HODLers Won’t Let Up

Amidst strong rallies, sell-the-news events, and dynamic markets, the vast majority of HODLers appear to be calmly riding the market waves. This set of Supply Last Active metrics measure the proportion of the circulating supply which has been held for multi-year time horizons.

We can see a slight downtick across the 1y and 2y bands specifically, with many, but not all being associated with GBTC. This indicates that a non-trivial volume of older supply has been on the move in recent weeks.

However, in absolute magnitude, the vast majority of the BTC holder base remains steadfast, with the percentage of held supply across multiple age bands residing just below ATHs:

🔴 1+ Years Ago: 69.9%

🟠 2+ Years Ago: 56.7%

🟢 3+ Years Ago: 43.8%

🔵 5+ Years Ago: 31.5%

Live Workbench

In the WoC-46-2023, we introduced and compared several measures of “Stored Supply” and “Active Supply”. At the time, we noted a large divergence was in play between the two, with a significant dominance towards coins being dormant, inactive, and illiquid.

This year we see the first signs of a potential closing of this divergence, a notable increase across all measures of “Active Supply”. This provides confluence with the aforementioned uptick in older coin spending.

Live Workbench

This has triggered the largest increase in liveliness since the Dec-2022 capitulation event. This again supports the above analysis, denoting an increase in Coinday Destruction as some investors part ways with a portion of their long-held coins.

However, when viewed in a macro context, Liveliness remains near multi-year lows, suggesting that the dominant majority of the supply remains tightly held, arguably waiting for higher spot prices, or perhaps increased volatility as a motivator to spend.

Live Workbench

On-chain and Exchange Activity

Assessing on-chain activity for Bitcoin can provide great insights into the health, adoption, and growth of the network. However, despite strong price performance, a counter intuitive observation has emerged with the number of Active Entities declining to cycle lows of 219K per day.

At face value, this might suggest that despite the significant price appreciation, growth in Bitcoin users has not followed suit.

This is largely a result of the uptick in activity related to Ordinals and Inscriptions, where many participants are re-using Bitcoin addresses, and reducing the number of measured ‘active entities’ (does not double count).

💡We detailed how analysts can better interpret Bitcoin on-chain activity metrics inWoC-28-2023 for further reference.

Live Chart

Transfer volumes on the other hand remains extremely robust with around $7.7B/day in economic volume processed. This divergence between ‘active entities’, and increasing transfer volumes highlights an elevated presence of large size entities active in the market, with the average Volume per Entity soaring to value of $26.3k/transaction.

This alludes to a growing presence of institutional investors and capital flows.

Live Workbench

Exchanges, remain the primary venue for trading activity, and deposit and withdrawal volumes have experienced a significant expansion, hitting $6.8B/day. Exchange related deposit and withdrawal activity accounts for approximately 88% of all on-chain volume at present.

The current volume flowing in and out of exchanges rivals peaks set during the 2021 bull market, with only 68 trading days (1.5%) recording a higher value (30D-SMA basis).

This again underscores an expanding interest in Bitcoin from market participants.

Live Workbench

Alongside increasing exchange flows, a regime of realized profit taking has followed suit. The chart below shows the average profit (or loss) per coin sent exchanges.

At the height of ETF speculation, this metric reached an average profit of $3.1k, a level reached at the peak of the April 2023 rally. This remains a far-cry from the $10.5k average profit at the zenith of the 2021 bull market, and is starting to cool off meaningfully.

Live Workbench

Conclusion

The approval of nine spot Bitcoin ETFs is a landmark event for digital assets, with institutional flows now openly gravitating to the asset class. Capital inflows are now accelerating, despite the significant supply overhang as investors rebalance out of the long challenged GBTC ETF product.

Exchange flows on-chain have also reached values equivalent to the peak of the 2021 bull market, and the average size of value transferred is highting a growing presence of institutional and large capital investors.

Comments

All Comments

Recommended for you

  • BTC breaks through $69,000

     the market shows BTC breaking through $69,000, currently at $69,021.49, with a 24-hour increase of 1.15%. The market is highly volatile, please manage your risk accordingly.

  • Spanish Foreign Minister: Not worried about any consequences of refusing US access to military bases

     on March 3 local time, Spanish Foreign Minister Alvarez defended the Spanish government's refusal to provide the Rota and Moron military bases to the United States for participation in attacks on Iran. Alvarez stated that the operation initiated by the United States and Israel is not supported by the United Nations and is not part of the bilateral agreements allowing the use of the aforementioned Spanish sovereign military bases. Alvarez also said that the Spanish government is not concerned that this stance will have any consequences. Alvarez stated: "The position of the Spanish government represents the will of the vast majority of the Spanish people as well as the vast majority of people worldwide, which is to defend the UN Charter, respect international law, and believe that cooperation is always more powerful than confrontation."

  • Spot gold plunges nearly $100 in the short term.

     spot gold plunged nearly 100 dollars in a short time, spot gold fell below 5170 dollars/ounce, with a daily decline of 2.94%. 

  • BTC falls below $67,000

    the market shows BTC fell below $67,000, currently at $66,996.93, with a 24-hour increase of 1.18%. The market is highly volatile, please manage your risk accordingly.

  • ETH breaks $2,000

    the market shows ETH breaking through $2000, currently at $2001.64, with a 24-hour increase of 2.89%. The market is highly volatile, please manage your risks accordingly.

  • The US spot Bitcoin ETF saw a net inflow of $962.48 million yesterday.

    according to Trader T's monitoring, the US spot Bitcoin ETF had a net inflow of 962.48 million USD yesterday.

  • BTC falls below $66,000

     the market shows BTC fell below 66,000 USD, currently at 65,986.66 USD, with a 24-hour decline of 1.31%. The market is highly volatile, please manage your risks accordingly.

  • BTC falls below $66,000

     the market shows BTC fell below $66,000, currently at $65,973.16, a 24-hour drop of 2.66%. The market is highly volatile, please manage your risks accordingly.

  • ETH breaks $2,000

    market shows ETH breaking through $2000, currently at $2000.29, with a 24-hour increase of 3.73%. The market is volatile, please manage your risk accordingly.

  • The United States uses Anthropic's artificial intelligence technology in its airstrikes in the Middle East.

     United States used Anthropic's artificial intelligence technology in airstrikes in the Middle East, and just hours before the attack, Trump had just issued a ban against Anthropic.