In a recent discourse by Nic Puckrin, CEO & Co-founder of Coin Bureau, the underlying forces driving Bitcoin’s price were discussed shedding light on potential strategic trading maneuvers. Puckrin elaborated on various facets influencing Bitcoin’s market dynamics and drew attention to nuanced indicators and emerging trends in a comprehensive thread.
Analyzing website traffic data from top crypto platforms and exchanges, a notable uptick in engagement during the December- February 2024 period was revealed. Despite this surge, traffic levels remain a far cry from the peaks witnessed during previous bull markets indicating subdued retail participation. Similarly, trading volumes on exchanges like Coinbase are significantly lower compared to historical highs.
On the institutional front, a notable trend emerges as institutional traders increasingly gravitate towards Bitcoin exposure via CME futures contracts. New study by K33 Research, CME Group and Tradingview suggests a connection between changes in Open Interest (OI) and futures premiums in Bitcoin futures contracts traded on the CME and the potential returns on those contracts.
When both OI and futures premiums increase, the findings show a positive correlation with returns averaging around 0.6% and 1.0% for daily and weekly periods respectively. Conversely, when both decrease, the correlation leans negative with average returns around -0.6% and -0.7% for daily and weekly periods.
Questions loom over Bitcoin’s role in traditional finance (TradFi) ecosystems. Recent correlations between Bitcoin and traditional assets such as the Nasdaq and S&P 500 have hovered below 20% suggesting limited influence from macroeconomic factors. However, the debate regarding Bitcoin’s status as a hedge against traditional assets remains nuanced and multifaceted.
The impact of supply-side dynamics, particularly Bitcoin halving events, cannot be overstated. While immediate effects on daily emissions may seem negligible the cumulative reduction in yearly rewards presents a substantial shift in long-term price trends.
According to the report, miners are currently on track to earn approximately 328,500 bitcoins per year down from 657,000 bitcoins per year before the halving. This represents a 50% decrease in new coin issuance directly impacting the overall supply growth of Bitcoin.
While ETF products introduce some selling pressure due to management fees, the emergence of lower-fee alternatives might mitigate this impact. The chart suggests that the Grayscale Bitcoin Trust (GBTC) has reduced the amount of Bitcoin it needs to sell to cover management fees. Previously, GBTC selling was estimated to have a significant impact on the market. The introduction of Bitcoin ETFs appears to have coincided with a decrease in selling pressure.
