Is the BTC price bottom coming? ETF buying is the key force to stop the decline

After the price of Bitcoin quickly fell below the important early support level of $56,000 today, it has become difficult to continue to make investment judgments from a traditional technical perspective. Where is the bottom of this round of decline? has become the biggest concern of all investors. Whenever the market encounters such a moment of large-scale panic, let us use first principles to return to the basic mechanism of price formation and analyze the supply and demand relationship of Bitcoin. We hope to help investors by studying the status and motivation of buyers and sellers. In a market full of opinions and emotions, find the best buying point in this round.

• Selling: German government selling, Mt. Gox exchange compensation, and potential early-year profit taking and miner follow-up selling, mainly conducted on crypto exchanges, which can be monitored and tracked through on-chain behavior
• Buying: Investors in U.S. Bitcoin spot ETFs mainly participate through stock accounts (The market will be closed for 1.5 days from July 3rd to July 4th for the U.S. National Day, and trading will resume tonight), through ETFs Intraday volume and after-hours net inflow/outflow indicators can be tracked.

Buying: Driven by optimism in US stocks, Bitcoin spot ETFs may bring the first wave of bargain hunting. July 5th is the first day of trading after the holiday. ETF trading volume and net inflows are most worthy of attention

There is already a lot of information about selling orders on the Internet, so I won’t go into details first. So we start our analysis with possible buys.

First of all, we believe that the power of long-term buying will remain this year. Mainly due to the macro background in the second half of the year: 1. The United States cut interest rates and risk asset prices rose; 2. Trump has a greater chance of winning the election, which is favorable for the cryptocurrency regulatory environment. So what is the specific relationship between the macro environment and BTC price? See the figure below. By comparing and analyzing the correlation between BTC prices and US stocks in the past six months, we can conclude that the rapid decline in the past two days is related to the main buying of this round of Bitcoin rise, and the Bitcoin spot ETF is closed. Status, it may also matter if you are unable to subscribe.

Figure 1: Correlation analysis between Bitcoin price and Nasdaq 100 (data source: SoSo Value)

Observed from the trading volume of CME futures, institutional investors have stable sentiments and may be waiting for bargain hunting. CME (CME Group) today’s Bitcoin futures trading volume did not fluctuate with the sharp fluctuations in currency prices, which indirectly proves that institutional investors are still relatively calm and in a wait-and-see state. In the context of favorable macro conditions and negative market conditions caused by special selling pressure due to historical reasons, we believe that this unrepeatable event will give investors who are optimistic about Bitcoin in the long term an incentive to buy.

Figure 2: CME Bitcoin futures trading volume on July 5th (data source: Bloomberg, as of July 5th UTC 8:00)

Figure 3: Historical trading volume and positions of CME Bitcoin futures (data source: CME)

So when will the buying point be? The Bitcoin spot ETF on July 5 may provide an indicative signal. After being closed for 1.5 days for the US National Day from July 3rd to July 4th, the Bitcoin spot ETF resumes trading tonight. The mood of the U.S. stock market has been very optimistic recently. Nvidia, Microsoft, and Apple have reached record highs again. Investors have bought Tesla at the bottom, with a return rate of nearly 40% in 2 weeks. Should buyers of Bitcoin spot ETFs follow the decline in currency prices, or follow the trend? Buying the dip in U.S. stocks? We'll see. Among them, intraday real-time trading volume and after-hours net inflow data are the core observation indicators. Higher trading volume represents a stronger enthusiasm for bargain hunting and is expected to send a signal to the market to stop falling; and if it can directly bring about a net inflow of funds into the chain, it will change the situation of trace net outflows in the past two trading days (see below for details) Figure 4), will also bring actual incremental funds to the chain, further enhancing the confidence of crypto investors.

Figure 4: Historical net inflows into Bitcoin spot ETFs (data source: SoSo Value)

Selling orders: nearly 200,000 from the German government and Mt.Gox Bitcoin selling pressure?

In terms of selling, which has become clear, there are two key sources of selling: 1. Bitcoin seized by the German government 2. Bitcoin used by Mt. Gox to pay creditors

The German government , may be the biggest force in the short-term market, and it is crucial when it stops reducing positions. The German government has seized a total of 50,300 Bitcoins. From June 19 to July 5, a total of approximately 8,080 Bitcoins were transferred out. The current remaining positions are 42,270 BTCs, with 83.94% of the positions still held. It has not been sold yet, and it is still doubtful whether this part will continue to sell heavily in the short term, and there is still a lot of uncertainty in the selling pressure.

Figure 5: Summary of BTC transfers from German government wallets (data source: Arkham)

Figure 6: German and US governments, Mt.Gox Bitcoin holdings and transfers Situation (Data source: Compilation and summary of public information)

Mt. Gox , The selling pressure may be far lower than market expectations. It is expected that 142,000 Bitcoins will be compensated to creditors. According to the Japanese crypto community, more than 70% of the creditor's rights may have changed hands through several rounds of OTC and been acquired by institutional buyers. The portion of Bitcoin being acquired is not expected to bring significant selling pressure. The remaining 30% of Bitcoins that will bring large-scale selling pressure are about 40,000-50,000 Bitcoins. According to on-chain data monitoring, on July 5, Mt. Gox has transferred out about 50,000 Bitcoins, of which 1,544 was transferred to the exchange, and 47,228.7 Bitcoins were transferred to the new address starting with 1L7Xbx. There has been no further movement. Taken together, the actual selling pressure generated by Mt. Gox may be lower than market expectations.

• July 4th : Multiple Mt. Gox wallets tested for small-value transfers.
• July 5th : Mt. Gox transferred over 47,228.7 Bitcoins (approximately $2.71 billion) to a new address starting with 1L7Xbx. The address subsequently distributed these Bitcoins to two addresses: 16 ArP 3...VqdF address 44,500 BTC ($2.55 billion); 1 JbezD...APs 6 address 2,700 BTC ($154.8 million), currently These two addresses have not been operated yet.
• July 5th : Another transfer of 1544 Bitcoins to address 1 PKGG, worth $84.87 million. The address belongs to the exchange Bitbank, one of five platforms that supports repayments from Mt. Gox.
• July 5th: Many MT.GOX creditors in Japan told the crypto media Shenchao that they have received BTC/BCH repayments from MT.GOX and the funds have entered Bitbank or Kraken exchange account. In addition, some people said they had received cash reimbursements sent by international wire transfers.

Potential miner selling has also become a factor in this round of decline, but this part of the selling follows the market and is expected to stop as Bitcoin stops falling. Due to the halving of Bitcoin mining rewards at the beginning of the year, Bitcoin miner profitability has dropped to its lowest level in two years. According to data from F2pool on July 4, based on the current Bitcoin mining difficulty and electricity price of US$0.06/kWh, mainstream mining machines such as Antminer S19 in the last cycle have reached the "shutdown currency price", and some unprofitable miners have been squeezed out. , liquidation and withdrawal will also bring potential selling pressure.

Figure 7: Bitcoin miner shutdown cost (data source: f2pool)

To sum up, buying is based on long-term benefits, and selling is due to special events. We believe that this unrepeatable event will bring buying opportunities to investors who are optimistic about Bitcoin in the long term. Judging from past practice, the market’s emotional digestion of selling pressure for a certain non-repeatable special event generally does not exceed two months. This round of Bitcoin decline began on June 7th and may gradually be digested after August 7th. , and the largest single-day decline in the past two days may be the lowest point of this round of decline.

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