Despite bitcoin’s rapid appreciation in recent months (up 47% YTD) and a seemingly endless stream of developments pointing to its rising adoption, the premier cryptocurrency has been under continual pressure since reaching its all-time high of $73,794 back in March.
Since then, bitcoin has remained locked in one of its longest-ever bull cycle consolidations, and this state of affairs has predictably elicited a wave of commentary (and cognitive dissonance) as to the reasons why.
While providing a comprehensive list of all possible reasons for bitcoin's current stalemate is beyond the scope of this article, we can look at certain key developments across three areas of analysis, technical, fundamental, and sentiment, to shed light on what the data is telling us about the current phase of the cycle.
Bitcoin's technical woes
Looking at it from a zoomed-out TA (technical analysis) perspective, bitcoin's recent moves to the downside appear consistent with technical trends associated with its market structure.
As seen in the weekly chart below, after initially hitting a new all-time high back in March, bitcoin underwent a correction but eventually found support around $61K from where it launched an attempt to reclaim 74K in May and into early June. But bitcoin's failure register another higher high marked the formation of a double top, a bearish reversal pattern after an asset has tried to break through a resistance level twice but failed. A double top often signals potential exhaustion of the bullish trend and suggests a likely downward move, particularly if the price drops below the intervening low aka the neckline.
This could see bitcoin fall to the next area of significant support between $51-52K (which has historic support going back to 2021), however, it is clear to see that there's both dynamic support from the 200MA and long-term support from the green trend line which goes back to Q4 2023.
At the same time, bitcoin’s move into overbought territory has historically served as a very reliable predictor of a coming correction, and we can see that it rose above 70 on the RSI in late 2023 and did so again in February through to April 2024. As a point of comparison, the last time bitcoin went overbought during the previous cycle (October 2020 to February 2021), it went on to retrace some 30% over the next three weeks as seen on the left-hand side of the chart.
Again, a scenario where bitcoin could experience a deeper sell-off before continuing its ascent would be well within the realm of the possible, even if the aforementioned factors suggest that strong price support is incoming.
Spot bitcoin ETF momentum stalls
After a spectacular first three months after their launch in January, the 'new nine' spot bitcoin ETFs have yet to record anything like these initial flows since April perhaps with the exception of the $887 million spike recorded on June 4th.
It's also important to note that we have yet to see substantial spot bitcoin ETF flows since GBTC selling pressure cooled in April. It has been widely documented that a significant proportion of spot bitcoin ETF activity in the first few months was not 'fresh capital', but instead reflected investors' willingness to roll out of GBTC to take advantage of the lower fees of the newly-launched ETFs.
Therefore, for those wondering why the single demand source of the ETFs hasn't been sufficient to propel prices into new ATH territory now that GBTC selling pressure has abated, the simple answer is: the current period has seen a significant reduction in flows. This trend is also mirrored by the Hong Kong ETFs, where spot crypto ETF flows and AUM have been trending down since June.
What this means is that once ETF flows start to pick up again in an environment where GBTC selling remains low, the impact on price could be pronounced.
Onchain data shows long-term holder selling
Another factor pressuring the bitcoin price comes from the behaviour of long-term holders. As seen in the chart below, since the bear market bottom in November 2021, the supply of LTH (defined here as coins held for 1+ years) steadily rose to a peak of 70.7% in November 2023 but declined once the price rose above $35K. It currently stands at 65.6%. This 5% drop may not sound like a big deal but it translates to over 980K BTC, so not a negligible amount of selling pressure by any means.
This phenomenon can also be seen on the long-term holder supply indicator, which is defined as the total amount of circulating supply held by addresses for 155 days or more. As it has been 172 days since the spot bitcoin ETF launched, they cannot be the source of the the LTH selling we have observed over previous months. Indeed, LTH's selling actually coincided with the launch of the spot bitcoin ETFs as shown in the chart below.
At the same time, it's important to note that there is nothing unusual about this pattern as those holding coins for the long term (often through a crushing bear correction) will decide to cash out for some profit or at break even. This is a fundamental aspect of market psychology.
Negative sentiment is being fuelled by one-off events
As crypto markets are significantly influenced by news stories that impact the mood and opinions of the community, media, and investors, sentiment analysis cannot be ignored when trying to make sense of market movements. Here, there have been several news items that have come to weigh on sentiment in typical 'sell the news' fashion, not least of which was the story that Mt. Gox creditors are set to receive 142K bitcoin (almost $9 billion at current prices) which could spark a wave of selling pressure in July. According to a JP Morgan study, the danger of a sell-off is significant and would be consistent with the recent behaviour of Gemini creditors which are assumed to have liquidated part of their crypto assets received in recent weeks.
Adding to the negativity were reports from June 25 that the German government transferred some $425 million in confiscated bitcoin to centralised exchanges Kraken and Coinbase as part of efforts to finally offload a major chunk of the 50,000 bitcoin seized by the German Federal Criminal Police Office (BKA) in 2013 from a piracy website.
Finally, while there remains some doubt as to the precise nature of the selling both by the German government and the Mt. Gox disbursements, there is considerable data to suggest that miner selling has definitively added to the diverse sources of bitcoin selling pressure. According to CryptoQuant data, miner reserves recently dropped to lows not seen since 2021, but this is not atypical as they continue to make financial adjustments post-halving.
Despite multifaceted selling pressure, the bull market will roll on
As laid out, it's clear that the selling pressure keeping bitcoin from moving higher has been multifaceted in nature. Despite this, we're already starting to see the bottoming out of LTH selling, and the lack of ETF flows is highly likely to be temporary as the rising acceptance of investment-grade products by mainstream firms and RIAs underscore bitcoin's bona fides as an asset class. At the same time, the clear trend in corporate treasury purchases is emerging as a major demand factor in an equally multifaceted picture of bullish drivers which, on the balance of probabilities, looks likely to provide the necessary momentum to propel bitcoin well beyond the resistance at 72-74K before this bull cycle is over.
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