BlackRock’s announcement of demand for spot ETFs on Bitcoin has catalyzed the return of institutional interest in BTC, making a non-negligible contribution to the recent rise in price. What’s more, the current market structure bears notable similarities to the early bull markets of previous BTC cycles, in June 2012, February 2016 and May 2019.
Bitcoin reacts to news about BlackRock
After a monotonous May and June, which tested investors’ convictions, the BTC price finally used the short-term realized price level as support.
In addition, theBlackRock’s Bitcoin Spot ETF Application Announcement catalyzed the return of institutional interest in BTCpropelling its price to the symbolic $30,000 mark.
Figure 1: BTC daily price
Finally, today’s market structure bears a striking resemblance to the early bull-market days of earlier BTC cyclesin June 2012, February 2016 and May 2019.
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Institutions finally give the sign of life
Shortly after the announcement of BlackRock’s Bitcoin spot ETF, institutional funds began to follow suit.creating a snowball effect for the BTC market. There have also been moves in existing Bitcoin spot ETFssuch as Canadian-based Purpose.
Figure 2: Spot Purpose Bitcoin ETF net BTC reserve flows
Following BlackRock’s ETF request, a considerable increase in ETF inflows was recordeda sign of the enthusiasm and FOMO of some institutional investors in the face of such important news.
This dynamic is illustrated by the evolution of the BTC funds held by Purpose: after a period of doubt and notable disinterest lasting around a year, the fund is finally getting moving.
In response to recent customer demand, Purpose bought over 4,000 BTC on the spot market.thereby leaving the plateau of 23,000 BTC under management, which had stagnated since the July 2022 capitulation.
Figure 3: BTC reserves of the Spot Purpose Bitcoin ETF
This swift response to BlackRock’s announcement is another step towards the adoption of Bitcoin by the traditional financial community. The latter will bring with it a capital flow of several billion dollars but also a potential increase in price manipulation on BTC, thanks in particular to the suppression of short-term prices via derivatives markets.
This upsurge in institutional demand can also be seen in the reserves of OTC platforms such as GSR and Kraken OTC. Up by more than 140% since the start of the year, the volume of liquidity available from these agents is adapted to market demand.
Figure 4: BTC reserves on OTC platforms
This suggests that demand from certain miners, exchanges and institutional players – who are regular users of OTC services – is also on the rise. Gradually, interest in BTC seems to be returning, and 2023 is shaping up to be a pivotal year.This will mark the transition between the end of the bear market of 2021 – 2022 and the bull market expected after the halving of 2024.
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A new wave forms
In a broader context, the current market structure bears notable similarities to the early bull market days of earlier BTC cycles.
Once again, the profitability of the BTC market has reached a low point (November 2022) and is entering a new phase of profitable supply growth. If previous cycles are anything to go by, it takes around 2 years for the percentage of supply in profit to go from a low point below 50% to a first local peak signal, with a percentage above 99%.
Figure 5: Supply of BTC in circulation and supply of BTC in profit
We can therefore expect 2025 to mark the beginning of the euphoric bull market phase to come. and the first extreme long-term profit-taking.
Taking this observation further through a statistical study, it appears that the current market structure closely resembles those of June 2012, February 2016 and May 2019. The following graph shows the historical average of the percentage of supply in profit (in blue), as well as variations of one standard deviation upwards (in red) and downwards (in green).
Figure 6: Bands of deviations in percentage of supply in profit
- Historically, periods in which the percentage of supply in profit is less than the variation of one standard deviation to the downside signal buying opportunities;
- Conversely, periods during which the percentage of supply in profit is greater than the variation of one standard deviation upwards signal sales zones.
Today, the percentage of supply in profit is just above its historical average, at nearly 78%. This value coincides with the transitions between the end of the bear market and the beginning of the bull market in previous cycles.
It is now clear that the bear market is behind us and that the BTC price is about to enter a new bull market cycle.which has historically lasted between 2 and 3 years.
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Summary of this on-chain analysis of BTC
Following BlackRock’s ETF request, a considerable increase in inflows to Purpose’s spot ETF was recordedsignalling the return of institutional interest in Bitcoin. This renewed demand can also be seen in the reserves of OTC platformswhose reserves have more than doubled in 6 months.
In addition, the current market structure has notable similarities with the early bull market hours of earlier BTC cycles. It’s now clear that the bear market is behind us and that the BTC price is about to embark on a new upward cycle.
However, let’s not forget that one of the historical triggers for ATH breaks is halving, which is only scheduled for March – April 2024.
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Sources – Figures 1 to 6 : Glassnode
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