It was all of, checks notes, nine days ago that my last Bitcoin (BTC-USD) article was published through Seeking Alpha. I don't generally write about Bitcoin this frequently for the public site but the market often provides moments that require additional analysis and this is certainly one of those. If you haven't read Bitcoin: 10 Years Since Cyprus since it was published last week I would encourage you to read that article in addition to this blog post. In that piece I ask a very simple question and then attempt to answer it from my vantage. Why does Bitcoin exist?
The most straight forward way I think we can look at BTC is as a bet against the current system. Hedge against inflation? More debatable. But it is very much a hedge against banking custodians and central planning.
A hedge against banking custodians and central planning? What could possibly be a reason for such a hedge in the land of global reserve currency privilege? As it turns out, mere days after my article that revisited the banking crisis in Cyprus back in March of 2013, we had our own little banking scare in the United States. Silvergate Capital (SI), Silicon Valley Bank (SIVB), and Signature Bank (SBNY) are now closed and uninsured depositors have been bailed out. We've seen First Republic Bank (FRC) thrown a life raft from peers. What assets have performed over the last week and what assets have crumbled as a result of these developments?
Data by YCharts
Turns out the financials have been nerfed while bitcoin and my preferred Gold proxy, Sprott Physical Gold Trust (PHYS), have ripped. Investors appear to be speaking loud and clear about where they think capital is going and Bitcoin seems to be turning some heads. Depending on how you view banking's impact on crypto, losing some of the banks that have helped bring capital into the crypto ecosystem could ultimately be a problem. So far though, the market seems more focused on the potential for money printing to backstop a financial sector that has an enormous duration problem if enough depositors start moving capital around.
But does Bitcoin's on-chain data back up the price move higher? Not from what I'm seeing.
As I said last week, BTC is a hedge against custodians. As much as I do buy this idea, we have to assess the on-chain dynamics to ascertain whether or not the fundamental activity aligns with the narrative driving pricing. So far, I'm not seeing a conclusive story from the resources that I typically lean on. Transferred value in native assets is still well below November lows according to data from CoinMetrics:
However, we have seen growth in non-zero wallet addresses over the last couple of weeks of 2.1% from 44.2 million wallets to 45.14 million since the end of February:
However, something else to be aware of is the exchange net flows; we've seen the BTC exchange flow spike positive over the last day or two:
This doesn't mean prices will come down imminently, but a spike like this in net flows could be a sign traders are ready to take advantage of the demand spike by feeding supply to this rally.
If we truly are at the beginning of a larger problem with banks, it theoretically does make sense to just keep buying things like gold or BTC to get wealth out of the old, dying system. If that is your sole motive, I wouldn't worry too much about $24k vs $27k. However, if you're trying to make a more value-focused targeted buy based on the plausibility of true large-money inflow, I think you can wait for a pull back. Technicals matter in my opinion because TA gives insight into broad sentiment. So far, the on-chain fundamentals aren't backing the narrative opportunity just yet.