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The price of Bitcoin "capitulated" for the first time this year in May, and then the Bitcoin market began to show signs of selling. Just last week (the last week of June), the market "capitulated" again, and Bitcoin once fell to $28,993, with a record loss of $3.45 billion. However, the price of Bitcoin has now recovered to around $35,000. In this situation, many people think that the miners are the most panicked, but in fact, if they persist, miners are likely to still make a profit, while institutional investors are in greater "trouble".
In fact, as the Bitcoin market valuation increases, it is likely that there will be larger USD-denominated gains and losses. Remember, when Bitcoin that was last moved at a higher price (creating UTXO) is spent again at a lower price (UTXO destruction), the loss will appear on the chain. It is worth mentioning that a large amount of "underwater" Bitcoin was sold in the last week of June. However, we found that almost all long-term holders made profits, and their "spending" actually offset a net loss of $383 million, and the total realized loss amounted to $38.33! Currently, the unrealized loss (unrealised loss) of Bitcoin held by long-term holders accounts for only 2.44%.
So when it comes to long-term holders (LTH) and short-term holders (STH), have they made a profit or a loss recently? In fact, there is an indicator that can be used to measure this - the Spent Output Profit Ratio (SOPR). This indicator allows us to compare the recent setbacks of Bitcoin on a relative basis. By analyzing the Spent Output Profit Ratio indicators of the two groups of people, we can see whether they are making a profit or a loss.
First, the data shows that the SOPR of long-term holders is 1.95, which means that they have realized a profit of 195%, and the realized profit has increased, which is because they are usually in a profitable state. But on the other hand, the profit rate of spent output of long-term holders has also begun to fluctuate greatly recently, although the fluctuation is lower than that of short-term holders SOPR.
The SOPR of short-term holders usually fluctuates around 1.0. This is because the market has been volatile recently, especially recently. You will find that the SORP values of short-term holders are all below 1, which means that they should have suffered significant losses recently.
Indeed, the price of Bitcoin has indeed entered a downward trend this week, as the market conditions showed by the increased volatility of the SOPR of long-term holders and the deep "capitulation" of the SOPR of short-term holders. This market decline seems to have caused a certain degree of panic among both long-term and short-term holders, and there is a high degree of uncertainty in the market: the average cost that long-term holders are now willing to spend is basically a digital currency that fluctuates between $920 and $1,630, while the realized losses of short-term holders are only slightly lower than the market crash caused by the new coronavirus epidemic in March 2020.
In addition, we also found that the market selling pressure mainly came from short-term holders, who had about 23.5% of all circulating supply with unrealized losses, while only 3.4% were profitable. At the same time, some long-term holders sold their digital coins during the market volatility due to the panic of cost spread, but most long-term holders did not choose to sell their digital coins because the digital coins that have been transferred are still very "young" (i.e., they have not been mined or held for a long time), although the market has realized a net loss of 34.5.
Bitcoin hashrate plummets, miners' selling pressure surges
With the largest mining machine shutdown in history, the computing power of the entire Bitcoin network plummeted, and the largest migration in history occurred, and miners' selling pressure followed. Industry insiders speculated that they needed to sell BTC to pay for the operating costs of mining machine transfers, and the selling pressure from miners was likely to bring resistance to price increases.
Due to the sharp decline in miners' income and the recent halving of Bitcoin prices, miners are forced to sell more Bitcoin to exchange for fiat currency to cover operating costs. In addition, miners have to liquidate the Bitcoin they already hold in their inventory due to the relocation or liquidation of mining equipment, and pay for the logistics costs and risk hedging by exchanging them for fiat currency, and these cost expenditures may continue for several months.
By evaluating the changes in total miner revenue (7-day average), we found that Bitcoin miner revenue remained relatively stable in March and April, but then the revenue of the Bitcoin mining market fell by about 65.5%. The current 7-day average mining revenue is about $20.73 million/day, which is still 154% higher than when the Bitcoin block reward was halved in May 2020. Despite the 154% increase in the 7-day average revenue, the difficulty of Bitcoin mining problems has only increased by 23.6%. The reason for such a mismatch between Bitcoin miner revenue and mining difficulty is mainly due to the global semiconductor shortage that limits miners' ability to expand their operations. In this case, it means that mining Bitcoin throughout 2021 will be very profitable, and Bitcoin mining hardware equipment that was supposed to be obsolete can still continue to be profitable. In other words, miners only need to sell fewer Bitcoins to cover operating costs and can build their own Bitcoin inventory reserves. Therefore, unless the Bitcoin price falls further or the "offline" and "relocated" miners can quickly resume online mining in the short term, miners who continue to operate may obtain higher profits in the coming weeks.
Through the above analysis, it can be found that Bitcoin miners who insist on continuing operations are unlikely to "excessively" or "forcibly" sell their Bitcoin holdings. Therefore, Chinese miners are more likely to be the current main source of sellers because they need to liquidate their inventory of Bitcoin to pay for mining machine transfer and operating costs.
In addition, by observing the 14-day moving average to compare the data of the same period as the difficulty adjustment window, tracking the speed at which miners send Bitcoin to exchanges, we found that during the whole of last year and the first quarter of this year, the miners' selling volume on digital currency exchanges basically remained at 300 to 500 coins per day, and the current selling pressure of exchange miners is actually significantly lower than this period. In March this year, the amount of Bitcoin flowing into digital currency exchanges by miners was about 500 coins per day, and in June it dropped to 200 coins per day.
Not only that, by reviewing the Bitcoin situation of some monitored OTC trading platforms, we also found that OTC exchanges are another major channel for miners to sell Bitcoin. In fact, OTC trading is closely related to changes in market trends, and the volume of Bitcoin OTC trading has shown a "downward" trend throughout 2021. Compared with April to June, the volume of Bitcoin OTC trading has remained between 8,000 and 6,000. In the past two weeks, the net outflow of Bitcoin in the OTC market was only about 1,134.
Next, we look at the total balance held in miners' wallets to see if Bitcoin miners are liquidating their inventory to cover the risks and costs of relocating mining machines. Data shows that since the price low of Bitcoin on January 27, miners have added a total of 10,000 Bitcoins to their inventory, accounting for 7.6% of the total amount of mined Bitcoin, which means that miners have distributed 92.4% of their "inventory" during this period. In addition, a total of about 7,000 Bitcoins were spent in miners' wallets in early June, which is likely that a miner or a group of miners began to liquidate their Bitcoins in preparation for the migration of mining machines.
Low institutional demand
Looking back at the golden period of Bitcoin price rise in 2020 and 2021, we found that the main driving factor was the increase in institutional demand, and the most eye-catching of them was the one-way inflow of Bitcoin into Grayscale's Bitcoin Trust Fund GBTC. As many traders tried to arbitrage, GBTC remained at a high premium in 2020 and early 2021. However, GBTC's high premium status could not be maintained. Since February 2021, they have had to trade at a discount to net asset value. Currently, Grayscale's Bitcoin Trust Fund GBTC holds more than 651,500 Bitcoins, accounting for 3.475% of the total supply of Bitcoin in circulation.
In addition, there are two Bitcoin exchange-traded fund products in Canada: The Purpose Bitcoin ETF and The 3iQ Digital Asset Management QBTC ETF. Among them, the total number of Bitcoins managed by The Purpose Bitcoin ETF has been growing. Since May 15, the net inflow has reached 3,929, which is equivalent to a daily inflow of 95.83 BTC. The total Bitcoin holdings of the Bitcoin exchange-traded fund have reached 21,597. At the same time, The 3iQ Digital Asset Management QBTC ETF has seen a large outflow of Bitcoin in the past two months, and the total holdings have also dropped significantly, which has reduced the current Bitcoin holdings of the Bitcoin exchange-traded fund to 12,975.
Although in terms of quantity, the total amount of Bitcoin managed by The Purpose Bitcoin ETF has exceeded that of The 3iQ Digital Asset Management QBTC ETF at this stage, if the two are analyzed together, the outflow of Bitcoin from these two Bitcoin exchange-traded funds in June reached 8,037.
Not only that, as an institution, the token balance held by Coinbase, the preferred trading venue for US institutional investors during the bull market, has also clearly flattened, although Coinbase has continued to outflow Bitcoin for a period of time since December last year.
Through the above analysis of institutions, we found that the demand of institutions seems to be still somewhat sluggish. (Golden Finance) |
