Beginning in mid-May this year, the Bitcoin market began to show signs of selling. As a result, this selling pressure did not reach the current trading low range all the way. Last week, Bitcoin fell to US$28,993, but it has now recovered to around US$35,000.
After the largest mining machine in history was shut down, the computing power of Bitcoin’s entire network plummeted, and miners’ selling pressure followed, and industry insiders speculated that they needed to sell.BTCTo pay for the operating costs of the transfer of mining machines. In addition, last weekGrayscaleBitcoin trust fund GBTC, various exchange- traded fund (ETF) products, and CoinbaseThe dynamics of Crypto currency holdings are also worthy of attention.
The second round of “surrender”
In May of this year, the price of Bitcoin “surrendered” for the first time in the year, and just last week (the last week of June), the market “surrendered” again, and the “chain loss “ set a record high ($3.45 billion ): When the last Bitcoin that moved at a higher price (created UTXO) was spent again at a lower price ( destroyed UTXO), the loss would appear on the chain. (Please note that as the valuation of the Bitcoin market increases, it is also very likely that there will be a larger dollar-denominated loss.)
This means that a large number of bitcoins “sinking under water” were sold off this week. It is worth noting that almost all long-term holders have made profits , and their “spending” actually offset 383 million. The net loss in USD, and the total realised loss is as high as 38.33 USD! The current unrealised loss held by long-term holders of Bitcoin accounts for only 2.44%.
On a more relative basis, we can actually pay attention to another indicator: Spent Output Profit Ratio (SOPR). This indicator allows us to compare the recent setbacks of Bitcoin on a relative basis. We can analyze the spent output profit rate indicators of two groups of people:
1. Long-term holders (Long-Term Holder, LTH);
2. Short-Term Holder (STH).
Although these two indicators are listed in the same calculation method, they may need to be interpreted differently:
* Long-term holders of SOPR (left, orange in the figure below), realized profits have increased because they are usually profitable. As shown in the figure, the long-term holder’s spent output profit rate is 1.95, which means that, overall, they have realized a profit of 195%, but on the other hand, the long-term holder’s spent output profit rate is recent Large volatility has also begun, although the volatility is lower than that of short-term holders of SOPR;
* Short-term holders of SOPR (right, blue in the figure below), as shown in the figure, the spent output profit rate of short-term holders usually fluctuates around 1.0. This is because the recent market turbulence is more obvious, especially recently. It will be found that the recent short-term holders’ SORP values are all below 1, which means that they should have suffered a lot of losses recently.
Just as the long-term holder-SOPR volatility has increased, and the short-term holder-SOPR has experienced a deep “surrender” in the market, the price of Bitcoin has indeed entered a downward trend this week. Overall, this market decline seems to have caused a certain degree of panic among both long-term holders and short-term holders. The realized losses of short-term holders are only slightly lower than the market caused by the covid-19 virus epidemic in March 2020. In the crash, the average cost that long-term holders are now willing to spend is basically a Crypto currency that fluctuates between US$920 and US$1,630, all of which indicate a high degree of uncertainty in the market.
However, despite some evidence that the current long-term holders are panic selling, almost all indicators that track the “lifespan” of cryptocurrencies continue to decompose to the level before the bull market. The reason for this is that we The explanation may have the following points:
1. Some long-term holders have dumped their cryptocurrencies during market volatility. The reason for selling at this time may be panic based on cost proliferation.
2. Most long-term holders did not choose to sell their own Crypto currency, because the Crypto currency that has been transferred is still “young” (that is, it has not been dug out or held for a long time), even though the market The realized net loss has reached 3.45 billion U.S. dollars.
3. Market selling pressure mainly comes from short-term holders . Of all the circulating supply of their holders, about 23.5% have unrealised losses, while only 3.4% have realized profits.
The miners’ selling pressure is coming
With the largest migration of Bitcoin’s entire network computing power in history, the market has been speculating about the size of the miners’ selling pressure, because the miners’ selling pressure is likely to bring resistance to price increases. For now, there are two main factors that may increase the selling pressure of miners:
1. The sharp decline in the income of miners, coupled with the fact that the price of bitcoin has been almost cut in half recently, has led to the fact that miners are forced to sell more bitcoins to exchange for legal tender to pay for operating costs;
2. Miners have to liquidate the bitcoins they have in their inventory due to relocation or liquidation of mining equipment, and exchange them into legal currency to pay for the logistics costs and risk hedging incurred. These costs may last for several months.
In order to display the analysis results more intuitively, we evaluated the changes in the total income of miners (7-day average). In fact, the income of Bitcoin miners has maintained a relatively stable level in March and April, but then the income of the Bitcoin mining market has dropped by about 65.5%, and the current 7-day average mining income is about 20.73 million US dollars per day. , But even so, it is still 154% higher than the Bitcoin block reward halving in May 2020.
Bitcoin miner income real-time chart
On the other hand, the difficulty of Bitcoin mining only increased by 23.6% during the same period. The mismatch between the income of miners and the difficulty of mining is mainly due to the shortage of global semiconductor chips, which limits the ability of miners to expand their business. In this case, it means that Bitcoin mining in the first half of 2021 will make a very substantial profit, and those Bitcoin mining hardware equipment that should have been outdated can still continue to make profits. In other words, miners only need to sell fewer bitcoins to pay for operating costs, and they can build their own bitcoin inventory reserves.
Although the average 7-day income has increased by 154%, the difficulty of the Bitcoin mining problem has increased by 23.6%. As a large number of mining machines are currently “offline” and “transferred”, the next adjustment of the difficulty of Bitcoin mining is expected to be large (-25%). Therefore, unless the price of Bitcoin falls further, or miners who “offline” and “transfer” can quickly resume online mining in the short term, miners who insist on continuing operations may earn higher profits in the next few weeks.
Bitcoin mining difficulty real-time chart
To a large extent, this indicates that Bitcoin miners who insist on continuing operations are unlikely to “excessively” and “forcefully” sell their own Bitcoins (corresponding to the first point of the above reasons), so Chinese miners are more likely It is the main source of sellers at present, and they need to liquidate the inventory of bitcoin to pay for the transfer and operating costs of the mining machine (corresponding to the above reason No. 2).
Therefore, the next question is whether Bitcoin miners are liquidating their inventory to cover the risks and costs of relocating mining machines. Here, let’s first look at the total balance held in the miner’s wallet . It turns out that since the Bitcoin price low on January 27th, the miners have added 10,000 Bitcoins to their inventory, accounting for mining 7.6% of the total amount of Bitcoin indicates that the miners have distributed 92.4% of the “inventory” during this period.
We can also see that a total of about 7,000 bitcoins were spent in the miners’ wallets in early June. It is likely that a miner or a group of miners began to liquidate their bitcoins in preparation for the migration of the mining machines.
Bitcoin miner wallet balance real-time chart
We also tracked the speed at which miners sent bitcoins to exchanges to assess relative selling pressure. Here, we use the 14-day moving average to compare data from the same period as the difficulty adjustment window.
Compared with the full year of 2020 and the first quarter of 2021, during these two time periods, the miners selling volume of Crypto currency exchanges basically maintained at 300 to 500 per day. The current selling pressure of miners on exchanges is actually significantly lower. During these two periods. In March, the number of bitcoins flowing into the Crypto currency exchange by miners was about 500 per day, but in June it dropped to 200 per day.
Bitcoin real-time chart of miners flowing into the Crypto currency exchange
We also studied the Bitcoin situation of some monitored over-the-counter trading platforms. Over-the-counter exchanges are also another main channel for miners to sell Bitcoin. Generally speaking, over-the-counter transactions are closely related to changes in market trends. Throughout 2021, the volume of Bitcoin over-the-counter transactions has shown a “decline” trend: from April to June, the volume of Bitcoin over-the-counter transactions has been It remains between 8,000 and 6,000, but in the past two weeks, the net outflow of Bitcoin in the over-the-counter market was only about 1,134.
Bitcoin real-time chart of over-the-counter transactions
Institutional demand begins to slow
The main driving factor for the increase in Bitcoin prices in 2020 and 2021 is the increase in institutional demand. One of the biggest factors is the unidirectional inflow of Bitcoin into the Grayscale Bitcoin Trust Fund GBTC. As many traders tried to arbitrage, in 2020 and early 2021, we observed that GBTC has maintained a high premium.
However, since February 2021, the high premium of GBTC has not been maintained, and they have to trade at a discount relative to the net asset value. In mid-May, the premium rate of GBTC has reached -21.23%. However, as the market sell-off intensified, the GBTC discount began to close up again. In the last week of June, the discount rate for the net asset value transaction of the Grayscale Bitcoin Trust Fund was between the low point of -14.44% and the high point of -4.83%.
Currently, Grayscale Bitcoin Trust Fund GBTC holds more than 651,500 Bitcoins, accounting for 3.475% of the total Bitcoin supply in circulation.
Grayscale Bitcoin Trust Fund GBTC premium rate real-time chart
It is worth mentioning that Canada also has two Bitcoin exchange-traded fund products:
1. The Purpose Bitcoin ETF;
2. The 3iQ Digital Asset Management QBTC ETF.
Analyzing these two products can also further understand the recent institutional needs. 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 the daily inflow of 95.83 BTC. (Calculated in 7 days a week), the total Bitcoin holdings of the Bitcoin exchange-traded fund has reached 21,597.
The Purpose Bitcoin ETF Bitcoin holdings real-time chart
At the same time, The 3iQ Digital Asset Management QBTC ETF has experienced a large amount of Bitcoin outflows in the past two months (the outflow reached 10,483 BTC), and the total holdings have also dropped significantly, which makes the Bitcoin transaction The current bitcoin holdings of the traded funds have dropped to 12,975.
In terms of quantity, at this stage, the total amount of bitcoin managed by The Purpose Bitcoin ETF has surpassed The 3iQ Digital Asset Management QBTC ETF. But if the two are combined and analyzed, the outflow of bitcoin from the two bitcoin exchange-traded funds in June reached 8,037.
The 3iQ Digital Asset Management QBTC ETF Bitcoin holdings real-time chart
Finally, at the institutional level, we can observe that the net change Coinbase hold the balance token, Coinbase US institutions during the bull market investments were the preferred place to trade. Since December 2020, Coinbase has continued to outflow BTC for a period of time, but now the changes in Coinbase’s Bitcoin balance have obviously flattened out.
Real-time chart of Bitcoin holdings on Crypto currency exchanges
Through analysis, we found that the GBTC premium rate of Grayscale Bitcoin Trust Fund has narrowed, the total amount of net outflows of Bitcoin from The 3iQ Digital Asset Management QBTC ETF and The Purpose Bitcoin ETF has increased, and the growth of Coinbase Bitcoin balance has stopped. Therefore, it can basically be concluded that institutional demand at this stage seems to be in a relatively sluggish state, and the market recovery remains to be seen.