Bitcoin spot ETF post-era on-chain data reveals the true supply and demand relationship

At the beginning of March, the Federal Reserve (FED) launched its semi-annual monetary policy report. As market expectations for a rate cut in June rose, gold prices reached their highest level in 2024. Just one day later, BTC also hit a new high in market value. The approval of the Bitcoin spot ETF can be regarded as a watershed. Two months later, financial promoters are accelerating the maturity of the crypto market and making it more complicated.

However, as an "honest" indicator that reflects the true situation of the market, on-chain data shows that the polarization trend of investors is becoming increasingly apparent. As the OKLink Research Institute said in the previous article "One day left for the approval of the Bitcoin spot ETF application: the United States will not let go easily!", "The new market is ready to go, and the original market is more determined." This article combines the on-chain data of OKLink, CryptoQuant and Glassnode to analyze the BTC market from the perspective of BTC's supply and demand and market distribution :

1. Analyzing the current supply and demand of BTC from on-chain data

From the supply side, according to CryptoQuant data statistics, as of the time of writing, there are currently more than 30 centralized trading platforms whose BTC holdings are in a state of outflow, with a total amount of approximately 71,934 BTC.

Figure BTC net inflow/outflow on centralized trading platforms from January 11, 2024 to the present (full data on March 10) (unit: BTC)
Data source: CryptoQuant

In addition, we can also see that miners are continuing to sell, mainly because they are rushing to liquidate before the next halving. The next mining halving will reduce the mining reward from 6.25BTC to 3.125BTC. As of the time of writing, the wallets bound to cryptocurrency miners calculated that the net outflow of BTC on the address was about 8,530 BTC during the period from the ETF's approval to the present. In other words, the reduction of BTC from the two major supply sides of exchanges and miners is about 80,464 BTC. Here, we have used the amount of net outflow for calculation, because the net outflow data includes the difference between the miners' own demand for hoarding coins and the actual mined BTC.

Figure BTC net inflow/outflow from miners’ wallet addresses since January 11, 2024 (unit: BTC)
Data source: CryptoQuant

On the demand side, although the market has been discussing the situation of Grayscale's continuous selling of BTC, due to the deviation of statistics from various data sources and the deviation of the time for each institution to update the spot ETF, here is a comprehensive calculation based on CryptoQuant and Farside data. The total amount of funds entering the market through the BTC spot ETF channel has reached US$9.594 billion. Compared with when the BTC spot ETF was allowed to trade, the total net inflow as of the local closing time on March 8 was about 176,396 BTC. The BTC spot ETF channel alone has caused BTC to be in short supply in the market , and the gap has reached more than 95,000 BTC. However, the real source of BTC supply is miners. Although there are other channels such as BTC outflows from exchanges, this is not a sustainable source of supply.

Figure 2: Bitcoin Spot ETF net inflow/outflow since January 11, 2024 (unit: BTC)
Data source: CryptoQuant

In about 40 days, the BTC halving will halve the newly generated supply. According to BTC settings: the reward will be halved every 210,000 blocks, until the block reward is 0 in 2140, all BTC will be issued, and the final total issuance will be constant at 21 million.

And it is different from the previous halvings. A groundbreaking innovation has emerged in the BTC ecosystem - inscriptions. According to Dune chain data statistics, the fees contributed to the BTC ecosystem from this innovation have reached 6,290 BTC, which has contributed part of the income to miners. In the future, with the development of innovative applications of the BTC ecosystem and the scalability of L2 solutions, miners' income will also increase, which also reduces the actual pressure on miners to sell BTC in order to cover mining costs. This means that the situation on the supply side is different from the previous halvings. The pressure to sell to the market has decreased, and miners are more willing to hoard coins instead of "supplying" them to the market.

Figure 3 BTC halving overview at 12 noon on March 11 Data source: OKLink

2. BTC Market Distribution: Moving to the Chain

If we assume that most of the new investors enter the market due to the BTC spot ETF, then the non-zero addresses on the chain can be assumed to be mainly old investors. According to OKLink data, the number of non-zero addresses on the chain shows a clear upward trend, which means that the number of addresses storing assets is increasing, not just new addresses added for increased address interaction, which also shows signs of BTC transfer.

Figure 3. Number of wallet addresses of BTC non-zero assets in the past three months. Data source: OKLink

For more detailed and specific asset movement information, you can also check the real-time dynamics and large transfers on the blockchain browser. From the OKLink data, it can be seen that the frequency of large transfers of BTC has also increased in recent days.

Figure BTC blockchain browser large asset transfer data source: OKLink

According to Glassnode, the amount of BTC transferred to this long-term storage is increasing at a rate of 180,000 BTC per quarter, twice the amount of new BTC being mined. This shift to using BTC as a long-term investment further tightens BTC's supply and could strengthen BTC's price base as the halving approaches.

Figure 1: Supply divergence between illiquidity and long-term holders Data source: Glassnode

The number of long-term holders moving to the chain is increasing, both in terms of the number of addresses and the amount of funds. According to a recent report by Glassnode, the BTC lock-up rate for long-term investment has exceeded 200% of the new supply. This means that although new BTC is still being mined, more BTC is held by investors rather than sold or traded.

3. VS Gold ETF? It also depends on scarcity

In addition to the on-chain data showing that BTC is currently in a state of supply exceeding demand, the scarcity of BTC also allows this trend to continue. Unlike the supply of legal tender that relies on central banks and precious metal assets such as gold, which are naturally limited, the issuance speed of BTC and the total supply of 21 million have been stipulated by its basic protocol since its birth.

When it comes to scarcity, we have to mention gold. Gold, which is often used to compare with BTC, is also regarded as an asset that is "in short supply" due to its high mining costs and limited natural resources. Especially in the face of inflation and war, its scarcity advantage is more prominent, and it is therefore called a model of fear trading. Therefore, the historical performance of the gold market is often used to compare the BTC market for analysis.

In terms of ETF performance, since the first gold spot ETF was approved in 2004, the price of gold has continued to rise, with a 346% increase in less than 10 years. However, it took a long time for gold to be widely recognized. In contrast, it took only 15 years from the birth of BTC to the approval of the spot ETF in 2024. Although the market continues to heat up, we need to consider that gold has an important historical position in the financial field. In 1717, the United Kingdom first adopted the gold standard system, incorporating gold into an important part of the monetary system.

Figure 1. Comparison of gold before and after spot ETF. Data source: Ash Crypto

When discussing the uniqueness of BTC as "digital gold", in addition to its material scarcity, its uniqueness in the financial system is also worth paying attention to. BTC's decentralized design allows it to be held outside the traditional financial system, while also providing billions of people without bank accounts with the opportunity to enter the global financial system.

As the BTC market develops, the decentralized nature of BTC has diversified participants and deepened its connection with the traditional financial market. There is a close relationship between the complexity of the market and the acquisition of data. In this context, the analysis and acquisition of on-chain data is more convenient than the data information of the traditional financial market. On-chain data comes from a network of nodes around the world and has the characteristics of an open ledger, allowing anyone to conduct market analysis and statistics in real time without relying on centralized institutions. This decentralized feature brings transparency and fairness to the data, and can effectively avoid the risk of single point failure and tampering.

In the increasingly mature and complex crypto market, the analysis and acquisition of on-chain data is more accessible than data information in other financial markets. The more complex the market, the more obvious the advantages of on-chain data. Due to its uniqueness, on-chain data will become our unique existence that is closest to the truth of the market.