Bitcoin Holds Steady Despite Macro Deterioration
BTC outperforms stocks and crypto markets
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This week we dive into Bitcoin’s steady price action, which can be considered remarkable as stocks take a hit. We discuss the potential drivers to this trend, analyzing key on-chain data points.
Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether
- Bitcoin fees continue to climb, reach a three month high of $7M this week
- On the contrary, Ethereum fees dropped to a nine month low of $22M
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges
- Net outflows from exchanges relatively picked up this week, with $240M of Bitcoin and Ether leaving CEXs
Bitcoin Holds Steady Despite Macro Deterioration
As expected, the Federal reserve did not raise interest rates this week. However, through their dot plot they did project one more hike this year and only two cuts into late 2024, showing their commitment to the higher for longer mantra.
This sent 10-year yields to their highest since 2007, putting pressure on markets. The Nasdaq and the S&P 500 are down 3.3% and 2.7%, respectively, so far this week. Yet Bitcoin has showed relative strength, managing to hold at the same price of $26,600 as last week and outperforming throughout the past 30 days.
Analyzing the Outperformance — Some key points that may explain Bitcoin’s steady price
- Bitcoin’s correlation to the dollar has hit a value of zero, putting it in a strong position despite the DXY’s rally
- The Bitcoin ETF passing continues to be a positive catalyst on the horizon, making holders hesitant to sell in advance
- Mt Gox’s repayment, where they plan to send 850,000 BTC ($23B) to users affected by their hack, was delayed by a year, easing the sell pressure that was anticipated if they had began redistributions next month as previously planned
Relative Strength in Crypto — Bitcoin’s dominance within the sector has been growing
- The ratio of Bitcoin’s market cap to Ether’s market cap reached a yearly high of 2.68x this week
- Bitcoin’s market share has rebounded in the past few weeks, approaching 50% for the second time this year
- Ethereum’s declining fees, driven partly by L2 adoption, may be putting some pressure on the second largest crypto-asset, as its supply has been growing over the past month, reverting its deflationary trend
Zooming Out — Bitcoin’s steady price action also has to do with its zealots remaining calm
- “Hodlers”, addresses holding BTC for over a year, have been accumulating during the recent bear market just as they have in previous ones
- Despite the recent correction, the total balance held by hodlers remains near record highs at 13.44 million, or 69% of the circulating supply
- Historically, these long-term investors have helped sustain price during bear markets and take profits as new all-time highs are set in bull markets
Overall, this trend appears to signal a bullish cycle for Bitcoin may be approaching. Though it’s unclear how long Bitcoin’s outperformance will last in a worsening macro environment, on-chain data shows that its long-term investors continue to accumulate regardless. This, plus the easing of sell pressure expected from Mt Gox, has been buoying BTC while the rest of the sector underperforms on a relative basis.
