Welcome to our new Bitcoin (BTC) on-chain analysis for June 2021. We go in detail in all metrics and core stats that shaped the Bitcoin Markets during the last few months specially in May and June 2021. Covering from main indicators, Crypto Whale Wallets , Futures volume and much more.
Remember also to subscribe to our Deep Tech newsletter here, which we send to our Investors & Audience, reviewing the trends, technologies and companies within our portfolio in MobileyourLife and Urano Capital .
BITCOIN (BTC)
The last few months for the Bitcoin markets have been the most intense and tough since 2012.
Before reviewing the month of June, let`s take a look at May 2021.
The month of May 2021 will remain in the history of cryptocurrencies as a drastic month, as Bitcoin witnessed its second worst month since 2012, with a 36% loss (only November 2018 was worst with a 37% loss that month)
From a price of 58,766 USD on May 8th it went down drastically to USD 31, 676 on June 25th. This has really shocked the markets as Bitcoin (BTC) came from an ATH of USD 63,606 on April 2021 driven mainly by major events we mentioned in our last research here.
With the recent institutional involvement of companies such as Tesla buying 1.5 BN USD worth in Bitcoin announced on a SEC filing last february and Microstrategy with CEO Michael Saylor with a current balance of around 105,085 Bitcoin (BTC) acquired for a total of 2.74 billion USD. (average price per bitcoin (BTC) of 26,080).
It is worth noting that the last purchase of BTC by Microstrategy of $489 million in cash at an average price of roughly $37,617 inclusive of fees and expenses comes after Michael Saylor having raised 500 MM USD from bond sale in order to buy more bitcoin.
Bitcoin: Grayscale Holdings vs. Bitcoin: The Bitcoin Fund (QBTC) Holdings vs. Bitcoin: Purpose Bitcoin ETF Holdings
It created the bullish trend we saw reaching as mentioned an all time high of USD 63,600 per Bitcoin on 04/13 and went down dramatically to USD 34,688 on 03/25 and then to USD 31,587 on 06/21.
From the major involvements since February 2021 on the institutions as mentioned before, the bearish movement on Bitcoin was affected by several facts including the tweets from the CEO of Tesla Elon Musk stating the concern of the high consumption of energy on the Bitcoin network coming from fossil fuels.
And that a transition to renewable energy sources for the Bitcoin miners is a must to a sustainable future for the network.
"We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel," Mr Musk wrote.
"Cryptocurrency is a good idea... but this cannot come at great cost to the environment."
He also said the electric carmaker would not sell any of its Bitcoin, and intends to use it for transactions as soon as mining shifts to using more sustainable energy.
BITCON MEAN HASH RATE
One of the main Bitcoin indicators as we always cover is the hash rate. Which in essence is the amount of computing and power being contributed to the Bitcoin network. A higher number of hashes per second produced by miners in the network it means in general a more robust and secure network.
We can see how the Bitcoin mean hash rate has been affected heavily the last few months. Falling from 197 eH/S to 106 eH/s on April due to the black out in China which we covered extensively on our past research here. It did recovered fast going back again on 05/09 to 190 EH/S to start decreasing again to 123 EH/S on 05/18 to 110EH/s on 06/11 to currently being at 85 EH/S. The decrease on the hash rate follows directly the fall on Bitcoin price over the last 6 weeks and the situation currently happening in China.
We can also note the fall on the Bitcoin mining difficulty due to the decrease on the hash rate. Falling from 25.046 trillion to 21 trillion at the beggining of June and currently at 19 trillion.
In May, Beijing called for a severe crackdown on bitcoin mining and trading, setting off what’s being dubbed in crypto circles as “the great mining migration.”
Texas is an ideal destination for miners, thanks to its abundance of solar and wind power, its unregulated market, and its crypto-friendly political stance.
China has long been home to more than half the world’s bitcoin miners, but now, Beijing wants them out ASAP.
The way this exodus is measured is as explained earlier, by looking at hashrate, measuring the computing power of all miners in the bitcoin network.
“Given the drop in hashrate, it appears likely that installations are being turned off throughout the country,” continued Carter, who also thinks that probably 50% to 60% of bitcoin’s entire hashrate will ultimately leave China
Despite a lack of reserves that caused dayslong blackouts last winter, Texas often has some of the world’s lowest energy prices, and its share of renewables is growing over time, with 20% of its power coming from wind as of 2019.
It has a deregulated power grid that lets customers choose between power providers, and crucially, its political leaders are very pro-crypto – dream conditions for a miner looking for a kind welcome and cheap energy sources.
Bundle of all active supply age bands, aka HODL waves. Each colored band shows the percentage of Bitcoin in existence that was last moved within the time period denoted in the legend.
Bitcoin as Legal Tender in El Salvador
The President of El Salvador, Nayib Bukele, announced (via video) that he will introduce legislation making bitcoin legal tender in the country. The legislation is likely to pass, given Bukele's effective control of the legislature (and public popularity: ~90%), which would make El Salvador the first sovereign nation to consider bitcoin legal tender.
The government will run a $150mm (initially) "trust-fund" to facilitate exchange between BTC and USD if a merchant doesn't want to take any BTC price risk. The state will provide training and (optional) wallet software to the populace. El Salvador will grant immediate residency to anyone who invests 3 BTC (specifically BTC-denominated) into the country.
In the days immediately following Bukele's announcement, politicians from Paraguay, Argentina, and Brazil all expressed support for bitcoin via twitter, by changing their profile pictures to "laser eyes", a meme in the bitcoin community.
Paul Tudor Jones Targets 5% Allocation to BTC
In a CNBC interview this morning, Paul Tudor Jones emphasized that he likes BTC due its certainty, stating:
I like bitcoin as a portfolio diversifier. The only thing that I know for certain is that I want to have 5% in gold, 5% in bitcoin, 5% in cash, 5% in commodities, at this point in time. I don't know what I want to do with the other 80%. I want to wait and see what the Fed's gonna do, because what they do will have a big impact.
GRAYCASLE PREMIUM
Bitcoin is set to undergo a defining moment in the third quarter of 2021, as around 16,000 BTC are set to be unlocked by the Grayscale Bitcoin Trust. The impact of this move from Grayscale will trigger massive spasms of price volatility for the largest cryptocurrency on the market.
Grayscale Bitcoin Trust, the world’s largest digital-assets fund manager, allows institutional investors to gain exposure to bitcoin through shares in the trust at NAV.
After a mandatory 6-month lock up period, shares are "unlocked," giving investors the option to sell their holdings on secondary markets to retail traders. For much of the past year, secondary shares have traded at a steep premium to NAV, which created a popular carry trade in which investors would purchase shares and profit off of the premium 6 months later. This type of trade helped fuel Grayscale's growth into the single largest holder of Bitcoin, which currently holds 654,600 BTC.
That’s more than 3% of the cryptocurrency’s supply. Grayscale is a unit of Digital Currency Group, which also owns CoinDesk.
Currently the incentive to reinvest is relatively low. The so-called Grayscale carry trade has lost its shine ever since GBTC began trading at a discount in February 2021
Currently the premium in the total value of Bitcoin Trust shares (GBTC) to the Net Asset Value (NAV) of the Trust holdings of Bitcoin is at discount of -11.73%.
BTC FUTURES
The arbitrage trade has become less attractive as the bitcoin futures curve flattened over the past few months.
Contango, a term used to describe the bullish arbitrage, occurs when the bitcoin futures price is higher than the spot price. Since April, bitcoin’s contango has narrowed as bullish sentiment waned. The one-month bitcoin futures contract has already moved into backwardation, which means the futures price is lower than the spot price. That’s another bearish signal.
Arcane Research also pointed to the negative funding rate on bitcoin perpetual swaps as a sign that short traders are in control.
Perpetual swaps are a type of derivative in cryptocurrency markets used to bet on future prices, similar to futures contracts in traditional commodities markets. A negative funding rate means traders who are short – betting on further price declines – are paying traders who are long, or positioned bullish, for leverage.
All exchanges have had negative perpetual funding rate during June. From 0.01% to 0.13% being the highest from Bitfinex with 0.131 % on June 25.
BITCOIN DELTA CAP
Delta Cap is the difference between Realized Cap and Average Cap, where Average Cap is assumed to be the life-to-date moving average of Market Cap.
It attempts to detect major market bottoms in Bitcoin cycles. We wanted to cover this metric as we can observe from the graph how it reflects both the bottom Bitcoin (BTC) had on March 2020 and more recently now in April 2021 reaching a bottom of USD 50,020 per Bitcoin to continue decreasing to USD 34,613 per Bitcoin by the end of May 2021 to a current price of around USD 35,900 per bitcoin at the time of press release.
Delta Capitalization
Delta cap is, as seen next, a hybrid of sorts — half “fundamental,” half “technical.” It is calculated through the following formula, measuring the difference between two long-term Bitcoin moving averages:
Delta Cap = RealizedCap - AverageCap
Realized Cap
Invented by the team of Coinmetrics, instead of counting all of the mined coins at current price, the coins are counted at the price when they last moved through the blockchain. This approximates the USD value paid for all the bitcoins in circulation
Average capitalization
Instead of setting a fixed period for calculating a moving average (e.g., a 200-day MA), this is a life-to-date, cumulative simple moving average that serves as the true mean of the whole history of market cap.
As seen at first glance, delta cap provides an excellent framework for catching global bottoms — or at the very least bottoms near the floor of the bear cycle.
BITCOIN : MVRV Z-Score
The MVRV Z-Score is used to assess when Bitcoin is over/undervalued relative to its "fair value". When market value is significantly higher than realized value, it has historically indicated a market top (red zone), while the opposite has indicated market bottoms (green zone).
Technically, MVRV Z-Score is defined as the ratio between the difference of market cap and realized cap, and the standard deviation of market cap, i.e. (market cap – realized cap) / std(market cap).
We can observe how it got to the red zone on February 21 when the indicator was at 7.63. Currently with the price of Bitcoin at 35,900 USD indicator went down significantly to 1.76. If continue the bearish trend could replicate last March 2020 when MVRV Z - Score decreased down to -0,17.
That`s all for today folks.
Thank you for reading our Bitcoin weekly recap. Stay tuned as we will be publishing more newsletters on the following markets from Bitcoin, Ethereum - DeFi and Stablecoins.