Bitcoin Stuck in This Range? Or a Breakout Looms?

👇1-13) Traders are complaining that Bitcoin is going nowhere despite prices only 7% away from new all-time highs. Many Bitcoins are being moved off exchanges while our stablecoin impulse delivers a warning sign.

👇2-13) Crypto market volumes have declined to $50bn while the funding rates are only marginally positive. Undoubtedly, interest is low. Fed policy and inflation data are seen as the two key variables that could push Bitcoin to new all-time highs. On June 5, the Bank of Canada could start the global rate-cutting cycle, offering a blueprint for the Fed, while the June 12 US inflation print would need to show a lower print (3.3%) for Bitcoin to rally.

Bitcoin funding rate (LHS, white) vs. Crypto Volumes (RHS, purple, $bn)

👇3-13) A sharp decline in Bitcoin exchange balances signals that whales are moving coins off exchanges in anticipation of higher prices. During the last month, 88,000 Bitcoins have been moved off exchanges, with 2.5 million coins remaining, the lowest level since March 2018. Exchange outflows started on May 15, coinciding with the 45 days after the quarter-end 13F filing requirement for US registered investors managing more than $100m.

👇4-13) Coinbase accounted for a third (29k) of those outflows, while seven out of the top ten exchanges registered outflows; only Bitfinex has seen strong inflows (7.6k). 50,000 Bitcoins were moved off exchanges at the end of May. Those data points are bullish, and the hash rate making an all-time high on May 27 at 657m TH/s (before slightly dropping back to 602m TH/s) signals that some mining activity remains bullish.

👇5-13) Bitcoin miner wallet balances have gradually declined from November 2023 (Bitcoin near 40,000) from 1.835m to 1.806m until the April 20 halving when balances were kept stable for a few weeks. However, during the last two weeks, we have seen an increased decline as reduced block rewards force miners to sell inventory to cover operational costs. Bitcoin miner wallets are holding 1.804m Bitcoins. Miners are selling.

👇6-13) Mega whales (>10k BTC) have increased their holdings by 164k BTC in May, the highest monthly number since January 2018 (the peak of the third bull market). Whales (1k-10k BTC holdings) have been selling -118k BTC, the largest amount since December 2022 (near the low). Sharks (100 to 1k BTC) were big sellers in February 2024 (-165k) but big buyers in March 2024 (+159k). The accumulation of Bitcoins by mega whales and the movement of coins off exchanges is bullish.

👇7-13) As a reminder, the distribution among 19.7m circulating Bitcoins: 1.77m potentially lost (number relatively stable since 2013), Mega whales (3.12m BTC, highest since November 2022), Whales (4.8m), Sharks (3.87m), Fish (10 to 100 BTC, 2.57m), Crabs (1-10 BTC, 2.13m) and Shrimp (<1 BTC, 1.42m). This shows that Bitcoin holders dominate the market with at least 100 BTC (Sharks), but Whales (at least 1k BTC) are the largest holder category.

👇8-13) Nearly $140bn worth of stablecoins have been issued, with wallets holding more than $10m accounting for more than 50%, a sign that large investors rather than retail traders drive stablecoins (or crypto overall). However, two days after the Bitcoin halving, when the transaction fees from Runes peaked, those stablecoin balances by whales ($>10m) dropped from $76bn to $72bn.

👇9-13) Wallet holdings tend to trend and are less volatile. Hence, Whales' April 22, 2024 stablecoin peak could be a critical turning point that signals large investors are either converting their stablecoins into crypto or fiat. However, fresh fiat-to-crypto inflows have stopped, which is worrying as this has been a critical driver for Bitcoin’s rise from 30,000 to 70,000.

Bitcoin (LHS, purple) vs. 30-day stablecoin impulse (RHS, white, $bn)

👇10-13) Only $400m of net stablecoin issuance (or $0.4bn) has been reported during the last 30 days; this is worrying as the positive stablecoin supply impulse that started after Grayscale won the lawsuit against the SEC in September 2023 has evaporated.

👇11-13) Smaller wallets (anything sub $1m) are still increasing their stablecoin holdings, either through fresh fiat-to-crypto conversion or, more likely, by converting crypto holdings into stablecoins (taking profit or cutting losses).

👇12-13) In conclusion, while smaller wallets are still increasing their stablecoin holdings, whales are quietly becoming less active and converting their stablecoins into crypto (BTC, for example) or fiat (off-ramp). Mega Whales’ Bitcoin buying coincided with large stablecoin minting in April/May. Minting has now paused, and coins are being moved off exchanges.

👇13-13) This leaves the macro impulse as the key variable. The market either needs rate cuts by the Fed (unlikely, but the June 5 Bank of Canada meeting could provide an early sign) or a lower inflation print (3.3%, possible in our view) on June 12 that causes, at least, a dovish pivot by Fed members. Otherwise, Bitcoin might be stuck in this 60,000 to 73,000 range.