Bitcoin sell-off coming? See how Smart Money responds based on on-chain data

Author: Jason Jiang, OKG Research

The miner group plays an important role in the Bitcoin network, but due to the impact of the halving event, plus concepts such as inscription runes, handling fees have calmed down The income situation of the miners has not been optimistic recently, and the income per unit of computing power has reached the lowest level in history. OKLink data shows that in the past two months, the unit computing power income of the Bitcoin network has fallen below $0.05 many times. Although there was a brief rebound during the period, it has now fallen back to a relatively low point again.

Due to the worsening income situation, many inefficient miners were forced to withdraw from the market, resulting in a significant decline in Bitcoin's computing power. OKLink data shows that in the past two months, the computing power of the entire Bitcoin network has dropped by 15% from the peak, and has continued to decline in the past week.

While the computing power is declining, miners have also increased their selling efforts recently, becoming one of the biggest selling pressures in the market. IntoTheBlock data shows that Bitcoin miners have sold more than 50,000 Bitcoins since 2024, and the Bitcoin reserves held by miners have gradually dropped to the lowest level in history. Compared to miners’ over-leverage and long-term holding tendencies in previous cycles, miners today are more focused on short-term gains. This may be due to the fact that with the reconstruction of computing power, many listed companies have become an important driving force in promoting the scale and mainstream development of the mining industry.

The compensation plan announced by the Mt. Gox trustee on June 24 also brought expectations of huge selling pressure. This is not the first time Mt. Gox has paid off its debt, but it is the first time it has paid out in the form of BTC and BCH. This means that after the compensation begins, a large amount of BTC and BCH will flow to the market. However, the author believes that the selling pressure caused by Mt. Gox's compensation will be less than expected. The reasons are as follows:

1. The number of Bitcoins that will eventually flow to the market for this compensation is expected to be far less than 140,000. According to Alex Thorn, the research director of Galaxy Digital, it is only about 65,000;

2. Selling pressure after the compensation is completed will be dispersed. Theoretically, creditors will not complete the sell-off at the same time in a short period of time. In addition, the market has already digested part of the sell-off expectations caused by Mt. Gox, so the final impact will not be as big as imagined;

3. More importantly, considering the current stage of the market, rational creditors may be more inclined to continue to hold rather than sell immediately.

Whether it is the miner group or the possible selling pressure caused by the Mt. Gox compensation, we believe that the impact on the crypto market will be short-term and limited. The experience of the past ten years tells us that despite many challenges, As the strongest consensus in the crypto market, the Bitcoin ecosystem has always had strong market resilience and elasticity. Therefore, short-term selling pressure will not change the long-term trend, but can instead enhance it. The adaptability of the Bitcoin ecosystem to large-scale flows. Compared with short-term selling pressure, what should be more concerned about now is the "dismal" situation of transactions and liquidity on the Bitcoin chain.

Although Bitcoin has performed poorly recently, it has still achieved a positive return of over 40% year to date, far exceeding most targets in the traditional financial market. But after hitting an all-time high in March, Bitcoin network transaction volume (left chart) has continued to decline. On the one hand, this is due to the decline in popularity of inscriptions, runes, etc., which has led to a decrease in transaction demand. On the other hand, because there is no strong transaction demand from either short-term speculators or long-term investors in the current price range, the turnover rate on the chain has always been Keep it low.

The number of active addresses on the chain (picture on the right) has also dropped significantly after March. The number of active addresses is now less than 700,000, which has dropped by more than 30% from the peak in 2024 and is almost the same as the same period in 2018.

In addition to the sluggish on-chain transactions, the recent performance of Bitcoin spot ETFs has also been relatively weak. As the main channel for obtaining external liquidity in the current cycle of crypto markets, Bitcoin spot ETFs are also an important carrier of optimism in the market outlook. JPMorgan Chase previously estimated that the net inflow of funds into the crypto market this year reached US$12 billion, of which the net inflow of Bitcoin spot ETFs was approximately US$16 billion.

But after entering June, the Bitcoin spot ETF has experienced net outflows for many days. From June 7 to the present (as of June 25), nearly 20,000 Bitcoins have been outflowed, which is approximately US$1.228 billion at the current price. . Such a performance is difficult to satisfy investors. The "quiet" handling of seized Bitcoins by the German and US governments has made the market even tighter.

Although the above data seems to prove that Bitcoin is in "difficulty", there are also many positive signs in the market.

One of the important characteristics of the real top in past cycles is that the proportion of short-term holders (holding time less than 155 days) has increased significantly, and even dominated the market. This is because in the process of reaching the top, long-term holders will gradually choose to take profits and leave the market, resulting in the market being controlled by short-term investors and new entrants. However, according to OKLink data, the current Bitcoin market is still dominated by long-term holders, with less than 20% of Bitcoins held for less than 6 months. This proportion is far lower than the short-term holdings near the top of the previous cycle. ratio. This market structure dominated by long-term holders gives Bitcoin stable support in the current range. At the same time, considering that nearly 80% of Bitcoins in circulation are currently profitable, most investors are still in a favorable position, so in the short term A large-scale sell-off is theoretically unlikely to occur.

On the other hand, exchanges’ Bitcoin reserves also hit a new low in June. Although low, the low reserve status of exchanges actually sends a clear signal that the selling pressure on Bitcoin is not actually high. At the same time, the low reserves of exchanges also indicate that the Bitcoin market is in a period of rapid accumulation, although at present we do not fully understand the structure of the group that takes Bitcoin away from the exchange.

Of course, the progress of the US Ethereum spot ETF is also worthy of attention. Although the correlation between Bitcoin and Ethereum has decreased, it still remains above 0.8, which means that the mutual influence between the two is very obvious. If the Ethereum spot ETF can drive Ethereum to rebound again after it is officially listed for trading in early July, Bitcoin may also get some momentum from it.

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