Bitcoin is set to become more speculative

2 Temmuz 2024

Today’s market analysis on behalf of Samer Hasn Market Analyst and part of the Research Team at XS.com

Bitcoin is set to become more speculative with retail investors frustrated as violent corrections continue

Bitcoin still fails to hold above the 63,000 level after the violent correction it went through last week that brought it below 60,000.

These violent corrections occur almost every time Bitcoin tests the 72,000 level at which sellers push prices to 60,000 within days. These are the prevailing trends from last March until now.

While the impact left by these corrections does not fade away after they end, but rather seems to eventually trickle down to investor sentiment, specifically retail investors and long-term holders known as “hodlers.” It seems that the failure to achieve more historical gains, despite the fundamental transformation witnessed by the crypto market, demoralizes investors and may prompt them to ditch their old holdings or refrain from accumulating more of them.

The percentage of Bitcoin returning to retail users is 87.9%, a decline from more than 89% that we witnessed this year, according to data provided by IntoTheBlock. The current percentage is near the lowest levels since mid-2022. The number of Bitcoins held by retails has declined to 17.35 million, which is near the lowest levels since last September and lower than the 17.57 million recorded last March. While the percentage of Bitcoin that belongs to hodlers has declined from the highest historical level we witnessed late last year at 70% to about 65%, this also falls at the lowest level since mid-2022.

While the decline in these Bitcoin holdings comes with the increase in the number of addresses which incurred losses to their owners at current price levels to more than 6.2 million addresses after the last correction and reached 7.6 million in late June, and these figures in turn are the highest since last April.

On the other hand, however, this decline in retail holdings may be attributed to the shift towards holding the US Bitcoin spot ETF, which have received net positive inflows of more than $14.5 billion since their launch last January, according to SoSo Value. These ETFs, in turn, recorded positive net inflows yesterday of more than $129 million, which is the highest since the seventh of last June.

In any case, the continuation of this exit for retail investors, even if it is due to the shift towards ETFs, does not serve the long-term narrative of Bitcoin, which is more adoption and use in the real world, far from being a speculative asset. This is because keeping Bitcoin in the custody of fund managers increases centralization and limits the possibility of using it as a decentralized global system for payments, and this is what it came for in the first place.

It is true that Bitcoin ETFs have contributed mainly to pushing prices towards historical levels this year, but in my opinion, their ability to maintain the upward momentum for an extended period is questionable. As many of the collapsed stocks on Wall Street are held by asset managers by substantial percentage, but this does not prevent their continued disappointing performance. For example, Zoom stock is nearly 90% down from its 2020 peak even though BlackRock and Vanguard hold nearly 15% of the share count and institutional investors hold approximately 70%.

Bitcoin may eventually go further, break its stubborn barriers, and reach further historic levels despite the current environment. I believe this will stem from investors’ hope that more investors will ride the bullish wave and may not be a result of wider adoption of crypto technology.

 

Zaid Barem / YMM