Spot ETFs are the leading reason why people are investing in Bitcoin. However, inflows are falling, with only $485 million coming in over the past week compared to a daily average of over $200 million. Moreover, net inflows fell into negative territory again yesterday, hitting -$224 million.
Image source: StormGain infographic
In March, a similar move was followed by a 9% correction.
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Bitcoin's biggest support group, long-term holders (LTH), is continuing to sell off Bitcoin to lock in profits. If we exclude the Grayscale fund, whose outflows persist due to high management fees, since December, LTHs have sold 614,000 BTC. That's 95,000 BTC more than has been accumulated by the newly created ETFs, with BlackRock at the head of the pack.
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The market is also under tangible pressure from miners, who have realised record volume on the OTC market since August 2023. Sales peaked at the end of March with 1,600 BTC per day.
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At the same time, the fear and greed indicator is near its maximum marks. This suggests that some market participants are overly optimistic.
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They are mostly pushing back on the notion that Bitcoin's impending halving event is a surefire reason for its price to increase. The disadvantage of such an assessment is that this procedure has a long-term effect, whereas, in the medium term, other arguments may take over, such as the cryptocurrency being overbought due to excessive optimism. Things aren't so smooth, even statistically speaking. In 2016, Bitcoin's price didn't increase until 9 months after the halving event.
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This time, the coin hitting a new all-time high before the halving event is exacerbating the situation. This encourages cautious investors to take profits near current highs without waiting for a potential correction.
Another difference in the current cycle is that the maximum relative drawdown (so far) has only reached 22%, whereas in the past, it has ranged from 40% to 70%.
Image source: glassnode.com
BitMEX co-founder Arthur Hayes believes that excessive expectations of the halving event could cause the price to crash by half in April.
"When most market participants agree on a certain outcome, the opposite usually occurs."
StormGain Analytical Group
(platform for trading, exchanging and storing cryptocurrency)
