Title: Is Bitcoin Stuck in a Range or on the Verge of a Breakout?
Introduction:
Bitcoin traders are growing frustrated as the price of Bitcoin remains stagnant despite being only 7% below its all-time high. The outflow of Bitcoin from exchanges and the warning signals from stablecoin momentum indicate a lack of trading interest, with the cryptocurrency market volume dropping to $50 billion.
Market Conditions and Key Variables:
Two key variables that could drive Bitcoin to new highs are the policy decisions of the Federal Reserve and inflation data. On June 5th, the Bank of Canada may start a global rate-cutting cycle, providing a reference for the Federal Reserve. Additionally, the US inflation data on June 12th needs to show a lower inflation rate of 3.3% for Bitcoin to have a chance of rising.
Bitcoin Transfers and Exchange Dynamics:
The sharp decline in the amount of Bitcoin held in exchanges suggests that large holders are moving their Bitcoin out of exchanges to “hodl” when they anticipate a price increase. In May, a total of 88,000 Bitcoins were transferred out of exchanges, leaving only 2.5 million Bitcoins, the lowest since March 2018. The outflow from exchanges began on May 15th, coinciding with the quarterly filing requirement of Form 13F for US registered investment managers holding over $100 million. Coinbase accounted for one-third of the outflows (29,000 Bitcoins), and seven out of the top ten exchanges showed outflows, with only Bitfinex experiencing strong inflows (7,600 Bitcoins). By the end of May, 50,000 Bitcoins had been transferred out of exchanges. These data points are bullish, and on May 27th, the hash rate reached a new all-time high of 657 million TH/s (slightly falling to 602 million TH/s), indicating continued bullish mining activity.
Miners and Whales’ Behavior Analysis:
Since November 2023 (when Bitcoin approached $40,000), the balance of Bitcoin in miner wallets has gradually decreased from 1.835 million Bitcoins to 1.806 million Bitcoins until the halving on April 20th, stabilizing for a few weeks. However, in the past two weeks, the decline in balance has increased as the reduced block rewards force miners to sell their inventory to cover operating costs. Currently, miner wallets hold 1.804 million Bitcoins, and miners continue to sell Bitcoin.
In May, whales (holding >10,000 Bitcoins) accumulated 164,000 Bitcoins, the highest monthly accumulation since January 2018 (the peak of the third bull market). Sharks (holding 100-1,000 Bitcoins) sold a significant amount in February 2024 (165,000 Bitcoins), but bought heavily in March 2024 (159,000 Bitcoins). The accumulation of giant whales and the movement of tokens out of exchanges are bullish signs.
Stablecoin Issuance and Market Liquidity:
Looking at the distribution of the 19.7 million circulating Bitcoins, 1.77 million Bitcoins are likely lost (a relatively stable number since 2013), whales hold 3.12 million Bitcoins (the highest level since November 2022), sharks hold 3.87 million Bitcoins, fish (10 to 100 BTC) hold 2.57 million Bitcoins, crabs (1 to 10 BTC) hold 2.13 million Bitcoins, and shrimps (<1 BTC) hold 1.42 million Bitcoins. This indicates that holders with at least 100 BTC (sharks) dominate the market, but whales (at least 1,000 BTC) are the largest holder category.
The total value of issued stablecoins is nearly $140 billion, with wallets holding over $10 million accounting for more than 50%. This suggests that large investors, rather than retail traders, are driving the stablecoin (or overall cryptocurrency) market. However, two days after the Bitcoin halving, when the Runes transaction fees reached their peak, the stablecoin balance held by whales (holding > $10 million) decreased from $76 billion to $72 billion.
Conclusion:
While smaller wallets continue to increase their holdings of stablecoins, whales are quietly becoming less active and converting their stablecoins into cryptocurrencies (such as BTC) or fiat currencies (liquidation). The purchase of Bitcoin by whales coincided with the massive stablecoin minting in April/May. Minting has now paused, and Bitcoin is being transferred out of exchanges.
This makes macroeconomic momentum a key variable. The market either needs a rate cut by the Federal Reserve (unlikely, but the June 5th Bank of Canada meeting may provide early signals) or lower inflation data on June 12th (we estimate around 3.3%) that would at least cause Federal Reserve members to shift towards dovishness. Otherwise, Bitcoin may remain in a range between $60,000 and $73,000.
