Bitcoin hodlers remain determined

Last week, the correction in the cryptocurrency market continued. The price of bitcoin dropped to a low of $38,400 on Tuesday. Meanwhile, the price has rebounded by over 11%, now sitting above $43,000. Does that mean the correction is behind us? All this and more will be discussed in this Weekly update!

This Weekly in brief:

• Market: The crypto market is quietly trading sideways around a price of $42,500. The market is digesting the spectacular fourth-quarter surge and the launch of the ETFs. Things still look good for later this year.
• News: Bitcoin hodlers are steadfast despite the volatility brought about by ETF approval. According to blockchain analysis company Glassnode, the number of hodlers remains stable and close to record levels.
• Behind the scenes: Last week we organized our New Year event. A successful evening where together with clients and relations we looked ahead to the upcoming crypto year.

Market update

Calm has returned to the crypto market. After a sensational surge in the fourth quarter and a tumultuous period around the launch of the American spot ETFs, last week was calm and almost boring. Prices moved sideways without sudden movements, and trading volume was below the average of recent weeks.

A pause after a period of growth helps maintain calm and prevents the market from overheating. A characteristic of hype and frenzy is that investors hold onto their unrealized profits with the thought that they can sell for more tomorrow than today.

While it is healthy for market participants to immediately express their preference by trading. Want to sell? Sell now. Unrealistic and unsustainable expectations such as 'up forever' create a crowd that rushes to the exit at the first sign of doubt.

In the chart below, you can see the realized profits based on transactions in the bitcoin blockchain. For the first time since the 2021 bull market, they are visible again. This increases the average purchase price of investors, the realized price.

A higher realized price, fewer unrealized profits, a lower MVRV — they are all interconnected, and they all tell the story of a sober market and a solid foundation for a possible future period of rapid ascent to new record prices.

We are not yet at new record prices. The market is first processing the developments of the past few months. Taking profits after last year's spectacular price increases is part of it, but also the large migration after the launch of the ETFs, and the investors who can finally sell their GBTC shares without a discount.

This messy period seems to be coming to an end. The exodus from the expensive Grayscale ETF is slowing down, and the inflow into the new ETFs is also decreasing. Added together, about 1000 bitcoins flowed into the ETFs over the past three trading days. Since the launch, the counter stands at just under 38,000 bitcoins in net inflow.

These are promising figures, but it is still too early to extrapolate these figures to the next few years. It is one of the many bright spots on the horizon that fuel optimism but still need time to materialize.

The halving is another example. From block 840,000, only 450 bitcoins per day will be introduced into circulation, instead of the current 900 bitcoins per day. We expect it around April 20. It will strengthen the narrative of bitcoin as digital gold, an attractive investment thesis for traditional investors.

The macroeconomic winds also seem to be blowing in a favorable direction. Last Wednesday, Jerome Powell, chairman of the Federal Reserve, spoke about monetary policy. He confirmed that we have likely seen a peak in interest rates which will decrease later this year. To guide a soft landing.

Stock markets rose to record highs in various places around the world over the past few days. Bitcoin is still going its way for now, but bitcoin may join later in the year.

News summary

This week, Glassnode published a concise analysis of the current state of the bitcoin market, focusing on insights obtained from so-called on-chain data - information recorded on the bitcoin blockchain. From this data, three key observations emerge.

1️⃣ The price movements of bitcoin since the lowest point in 2022 show remarkable similarities with past cycles.

Glassnode's analysts note: "The suggestion that history repeats itself in a rhyming manner is confirmed here." The analysis reveals that the performance of the last three cycles closely resembles each other. Unique to the current situation is increased resilience, with corrections after local peaks being relatively limited. "The sharpest decline to date was -20.1%, recorded in August 2023."

2️⃣ The majority of long-term bitcoin investors are not inclined to sell their holdings at current prices.

Despite the tumultuous market movements of recent times, with significant increases and decreases in bitcoin, the majority of hodlers - investors who are not easily swayed - remain calmly moving with the market. Their share in the total bitcoin supply remains stable and close to record levels.

3️⃣ Network activity in terms of the number of entities is low, but the monetary volume moved on-chain is significant and comparable to previous bull market cycles.

The daily monetary volume flowing through the bitcoin network remains impressive at around $7.7 billion. The average volume per transaction increases to about $26,300. Glassnode interprets this as "an indication of increasing involvement of institutional investors and their capital."

Other news:

• Within three months, LPL Financial, the largest independent securities broker and dealer in the United States, will decide on the admission of bitcoin funds. With over 12,500 affiliated financial advisors, a staff of over 4,600 employees, and over $1 trillion in managed assets, LPL plays a leading role in the American financial sector. The company indicates that it first wants to establish that spot bitcoin ETFs are not short-lived phenomena before offering them. According to a statement to Bloomberg, a key concern for LPL is that ETFs that do not attract enough capital may be quickly shut down.
  
• DZ Bank plans to launch a pilot project for bitcoin trading aimed at the consumer market this year. As the central body of more than 700 affiliated banks in Germany, DZ Bank plays a leading role in German banking. According to DZ Bank board member Souad Benkredda, in a conversation with Bloomberg, there is significant interest in this initiative; about half of the affiliated banks are ready to take this step. The offering will be diverse. DZ Bank aims not only to enable trading in bitcoin but in a wide range of cryptocurrencies. This is an important aspect of their strategy.
  
• Google has changed its advertising policy to allow companies managing bitcoin funds to advertise through the platform. This adjustment took effect on January 29, after which the first sponsored search results, including those from prominent players such as BlackRock and VanEck, immediately became visible. ETF specialist Nate Geraci indicates that Meta, the parent company behind Facebook and Instagram, is also planning a similar policy change.