(2. Continued from the previous article...💥)

By contrast, in 2016, Brexit may have triggered financial concerns about the UK and Europe, which may have been a catalyst for Bitcoin buying behavior. This trend then continued with the 2017 ICO boom. In early 2020, central banks and governments around the world responded to the COVID-19 pandemic with unprecedented stimulus measures, which caused Bitcoin liquidity to rise sharply again.

It is also important to note that analysis of historical performance can vary significantly depending on the observation period relative to the halving event. The price return metric may change depending on whether the analysis looks at periods starting (and ending) 30, 60, 90, or 120 days from the halving date. Therefore, using different windows may affect the conclusions drawn from past price performance. For our purposes, we use a 60-day period because it both helps filter out short-term noise and is not so far away from the halving that other market factors may start to dominate price drivers in the longer term.

ETFs: The secret to success is getting started

The U.S. Spot Bitcoin ETF is reshaping market dynamics for Bitcoin by establishing a new anchor for Bitcoin demand. In previous cycles, liquidity was a major impediment to upward price momentum as major market players, including but not limited to Bitcoin miners, would drive selloffs as they attempted to exit long positions.

Today, ETF inflows are expected to absorb most of the supply in a gradual, sustained manner. In fact, ETFs now have an average daily BTC spot trading volume of approximately $4-5 billion, accounting for 15-20% of total global centralized exchange trading volume, making liquidity sufficient for institutions to trade in the space.

This stable demand situation could have a positive impact on Bitcoin’s price in the long term, as it creates a more balanced market with less volatility from concentrated sell-offs.

The U.S. Spot Bitcoin ETF has attracted $9.6 billion in net inflows in the first two months, bringing total assets under management to $55 billion. This means that the cumulative net growth in BTC held by these ETFs (180,000) during this time period was nearly three times greater than the 55,000 new Bitcoin supply generated by miners (see Figure 3).If we look at all spot Bitcoin ETFs globally, these regulated investment vehicles currently hold approximately 1.1 million Bitcoins, accounting for 5.8% of the total circulating supply, according to Bloomberg.

In the medium term, we may see ETFs continuing to maintain or even increase current liquidity, as large brokerages have not yet started offering these products to clients. With over $6 trillion currently still held in U.S. money market funds, and with interest rate cuts on the horizon, we believe there will be plenty of spare capital to move into this asset class this year alone.

By the way, please note that potential centralization issues with Bitcoin held by ETFs do not pose a stability risk to the network, as simply owning Bitcoin does not give you any influence over the decentralized network or control over its nodes. Furthermore, financial institutions are not yet able to offer derivatives based on these ETFs (as the underlying assets), which, once available, could change the market structure for large players. However, regulatory approval is conservatively estimated to take several months.

Hypothetically, if we assume that the pace of new inflows into U.S.-based ETFs has slowed from $6 billion in February to a plateau of $1 billion in net monthly inflows, a simple psychological model suggests that relative to the monthly With around 13,500 BTC (after halving), the average price of Bitcoin should be close to around $74,000. Of course, an obvious problem with this model is that Bitcoin miners are not the only source of selling Bitcoin supply in the market. In fact, we believe the imbalance between newly mined Bitcoin and ETF inflows is only a small part of the equation behind the long-term cyclical supply trend.

💥Lies, damn lies and statistics💥

One way to measure the supply of Bitcoin available for transactions is to take the difference between:

(1) Current circulating supply (19.65 million BTC);

(2) Illiquid supply, these Bitcoins are essentially untraded due to lost wallets, long-term holdings, or otherwise being locked.

According to data from Glassnode, which classifies illiquid supply based on cumulative inflows and outflows over the lifetime of a given entity, available Bitcoin supply levels have been trending downward over the past four years, from a peak of 5.3 million BTC in early 2020 down to the current 4.6 million.This is a significant shift from the steady upward trend in available supply observed during the previous three halvings.

At first glance, the decline in Bitcoin trading availability appears to be one of the main technical supports for Bitcoin’s performance as we have new institutional demand from ETFs. But in fact, given that fewer new Bitcoins are about to enter circulation, these supply and demand dynamics suggest that the likelihood of a market tightening in the short term may be high. That said, we believe this framework does not fully capture the complexity of Bitcoin market liquidity dynamics, especially since “illiquid supply” does not mean static supply.

We believe investors should not overlook several key factors that may influence selling pressure:

Not all Bitcoin in illiquidity is “stuck.” Long-term holders (holding Bitcoin for more than 155 days, accounting for 83.5% of holdings) may be less economically sensitive to their holdings relative to short-term holders, but we expect this Some in a group may still realize profits when prices rise.

Some holders may have no intention of selling in the near future but can still provide liquidity by using their Bitcoin as collateral. This also affects the "illiquidity" attribute of these Bitcoins to a certain extent.

Miners may sell their Bitcoin reserves (currently 1.8 million BTC for public and private miners) to expand their operations or cover other costs. #热门话题 #BTC #sol