MARKET RESILIENCE AMID FALSE RUMOURS AND ANCIENT BITCOIN REVIVAL 

The cryptocurrency market has experienced a sharp sell-off recently, primarily fuelled by false rumours regarding the Mt. Gox Trustee and US Government distributions. Despite this, Bitcoin’s price has shown remarkable signs of recovery, fluctuating between US$27k and US$30k since mid-March. Inaccurate rumours, combined with activity by ancient supply holders, contributed to this significant market turbulence. Additionally, the revival of approximately 3.2k ancient Bitcoin has added to the market’s volatility.

Analysing the Revival of Ancient Coins and Its Impact on Market Volatility

This week, around 3.2k BTC from 7 to 10-year-old and older age bands became active, with 1.1k BTC originating from the pre-2013 era. Entity-adjustment can be used to filter out internal transfers, confirming that these transfers were, in fact, not internal. Although the magnitude of this activity isn’t significant compared to previous isolated events during cycle pivot points, it is essential to monitor the ancient supply to warn of incoming selling pressure. Currently, 4.25 million Bitcoins have reached ancient supply status, with 3.9 million ancient coins (20% of the circulating supply) remaining dormant. Dormant coins are often assumed to be lost, and any movement from these coins could impact market sentiment.

Dispelling Mt. Gox Rumours and the Importance of Monitoring Wallet Activity

Rumours regarding Mt. Gox coins being on the move have been circulating, but the balance has remained stable at 137,890 BTC since 2018. The first tranche of distributions occurred in 2018, and no recent spending has been observed. Expected distributions are set to commence in 2023, and the importance of monitoring this balance, currently worth $3.93 billion, cannot be overstated.

Deciphering Young Supply and Market Demand Indicators

The rising share of young supply during a rally indicates capital inflow, while old supply spending transfers cheap or old coins to new buyers at higher prices. The current pattern resembles the 2019 uptrend, followed by equilibrium before the 2020-21 bull market. The transfer of USD-denominated wealth into the young supply region has also been observed, with new investors’ wealth share increasing from 20% to 40%. This uplift is also similar to that seen in early-2019, with 28.2% of total invested wealth held by recent buyers. However, this figure remains below the +40% threshold level in prior bull markets, indicating that new demand inflows are relatively soft, and supply is mainly held by longer-term, higher conviction holders – a positive sign that a potential bull market is still only in the early phases.

Analysing Exchange Inflows: The Impact of Short-Term Holders on Market Dynamics

Exchanges play a vital role in the cryptocurrency ecosystem, serving as the primary venues for price discovery and attracting speculator funds. By analysing capital flows into and out of exchanges, we can gain valuable insight into investor responses to market conditions.

During the recent rally, non-trivial inflows were observed, with the Net Position Change reaching as high as +30k BTC per month. However, the Net Position Change has now decreased to 22.3k BTC per month, suggesting that there is still persistent sell pressure in the market.

Short-Term Holders (STH) consistently dominate inflows to exchanges, accounting for 90%-95% of the total. Throughout 2023 so far, there has been a notable increase in profit-taking by STHs, who now account for 58% of exchange inflows.

In fact, since early January, two distinct waves of profit-taking by STHs have been observed. The first wave saw STHs’ profit share peak at 60% of total exchange inflows. The second wave of STH profit realisation closely corresponds to the recent market correction, indicating the influence of short-term holders on market dynamics. When STH selling pressure runs out, market history shows us that price increases are the result.

In conclusion, despite the recent market turbulence caused by false rumours and the revival of ancient Bitcoin, the cryptocurrency market has demonstrated remarkable resilience. The increase in young supply, wealth transfer to recent buyers, and the decreasing sell pressure from short-term holders all suggest that a potential bull market is still in its early stages. As we continue to monitor market indicators and address the impact of short-term holders, it is crucial for investors to stay informed and make well-educated decisions. If you’re interested in an easy and personal way to buy cryptocurrency, don’t hesitate to contact Ainslie at 1800 161 383. Our team of friendly consultants are ready to guide you through the process, making your cryptocurrency buying journey effortless.