header banner
Default

Analyst: The amount of Bitcoin available on exchanges has dropped to its lowest point since 2018


Table of Contents

    GDP numbers just came out 4.9% annualized third quarter. Uh We're expecting much lower than that. We're a good 0.6%. Uh it uh 60 basis points higher than expected in growth. So what does this all mean joining us now to discuss is Forex dot com. Global head of research, Matt. Well, welcome back, Matt. Hey, thanks for having me. Good to be here seeing you. Ok. So obviously we have these new GDP numbers coming out that just came out. Uh and, and an interesting spike here going on in Bitcoin. And I, I do want to get a little bit into the whole discussion of supply because uh we talk about supply, there's also supply of stablecoins, but in a very interesting way, large supply now growing in us, DT versus us. DCU S DC has been on a steady decline for months. Now, us DT increasing, spiking up a little bit. Uh What is that ultimately mean? If you, if you're stepping back and you're looking at the kind of players that are in the market, if you were to guess uh given what we know about us DT users versus us TC users and how does that translate into what's going on with views about the ETF potential spot? Bitcoin ETF that is uh that the market is speculating on. Sure. So I think when we look at users of tether versus circles stablecoin US, DC tether tends to be more global whereas US DC tends to be more focused in the US. And I think we're just seeing a regulatory environment where globally the there's a greater support for crypto than in the U SI. Think we can see with the SEC dragging its feet around approving an ETF. So that seems likely to end sooner rather than later that the regulatory environment here in the US is just a bit more restrictive whereas adoption seems to be growing globally. So to me that's what the increasing supply of tether speaks to relative to us. S DC. So let, let's take a look at a little bit here when we come to speaking of supply, supplies of Bitcoin itself and, and supplies of Bitcoin going to the exchanges and available for sale. What does this all mean unpack that for us? Yeah, this is an absolutely fascinating development that's sort of been occurring beneath the surface or at least something I haven't heard many people talking about. We look at the supply of Bitcoin on exchanges available for buying, selling relatively rapidly. And we can compare that to uh Bitcoin that's been held for a very long period, specifically 10 plus years. So that takes us back to 2013, only a couple of years after Bitcoin's inception. And we actually see a greater supply of Bitcoin that's been held, not moved, not touched for 10 years than we see on exchanges. That amount on exchanges has fallen now to the lowest level since 2018. And to me, that's suggestive of a potential supply shock. Essentially, there's not too much Bitcoin actively uh liquid in the markets that's, that's available for trade certainly as price rises. So more of that, that Bitcoin that's been held for a long time can come back out. But as it stands right now, I think it, it kind of speaks to the environment we've been in where only the diehards have been sticking around and accumulating that Bitcoin and they're not likely to sell easily. So with lower supply on the market, it only takes a small bump in demand like we've seen with speculation around the ETF to really drive prices higher at a rapid rate. Matt, you said that this ETF approval or this possible ETF approval is a matter of when and not if some other folks have said that on this show, uh what's your perspective on that? Why are you so sure that the approval will come through? It's just reading the tea leaves, I suppose. But um I fundamentally believe that there wasn't a strong case to, to delay it as much as they have some of the other products that we see that have been approved in the US um are, are potentially more risky for investors, certainly higher cost and it's led to distortions in the market for investors who clearly have a demand to get exposure to Bitcoin and other crypto assets. I'm thinking of things like uh persistent discount in G BT C, the closed end fund um that is actually starting to close, which I view as a proxy for an imminent ETF approval, that discount, which was as wide as about 40 or 45% at the beginning of the year is now down to 15%. Of course, the idea is if G BT C uh gets approval to transition into an ETF that, that discount should close immediately because in spontaneously, traders can uh exchange Bitcoin for shares and vice versa and that sort of uh like kind exchange is missing right now. So uh I, I think the mar that's a sign that the market is coming around to this view and uh that regulators probably by January at the latest and potentially as soon as the next couple of weeks will approve at least one and probably a raft of ETF S. Uh that, that in my view should have been approved years ago. Now, you, you have another chart and II I, I'm I have to just disclose my bias here. I'm always, I'm a 90 day correlation guy. Um So for me, every time I see 20 day correlations. Uh I, I get a little bit antsy. I'm, I'm not gonna lie. Uh So here we see 20 day correlation, rolling correlations with the NASDAQ composite index, I believe. Right? Or is that NASDAQ 100? Uh Anyway, yeah, go on. Yeah, sure. So that, that's um what we've got here is, is the 20 day kind of a short term uh correlation between the NASDAQ 100 Bitcoin. Of course, everyone was concerned that Bitcoin was just a, a higher beta NASDAQ, that classic risk trade that, that worked when interest rates were zero. Now that interest rates are rising and the NASDAQ struggling that Bitcoin likely wouldn't either. And at least over the last 20 days, uh that, that has not been the case, Bitcoin of course, has been rallying very strongly whereas the NASDAQ has been falling, I think uh and I was trying to pull up the 90 day correlation while we were speaking, uh I did take a peek at it and I can, I will uh anyone viewing can look for themselves but, but that correlation is falling to it. And to me what this suggests is that maybe that uncorrelated uh investment thesis for Bitcoin is, is coming back to the fore and that's something that I think could be very compelling, especially if an ETF gets approved because that's gonna have a appeal for uh institutional investors who perhaps weren't comfortable until we had uh a formal sec approved product. And uh a and even if we see just a small amount of allocation from some of those big funds on this uncorrelated uh or occasionally uncorrelated uh asset investment thesis, that could be a very bullish sign for Bitcoin in the whole cryptos sphere on the assumption that institutions will jump into an ETF though what once this is approved, doesn't that inherently lead to tighter correlations across the board. So Bitcoin becomes more correlated with other traditional assets if traditional players are in it, because hey, you lose money in one sector, you, you sell out to, to staunch those losses. Uh Isn't that kind of the same idea here that once it becomes institutionalized through an ETF, those correlations will go up yes in a steady state. And, and the, the argument here is that we're not in that steady state yet, that there will be a period where uh inevitably uh these institutions which have haven't had easy access to Bitcoin will now presumably be able to buy the ETF. And that will, unlike the futures products, we've seen that mark near term tops in the market that fundamentally alters at least for a couple of until we get to a steady state phenomenon, the the supply and demand picture for Bitcoin. So uh that ETF of course, would have to buy physical Bitcoin and hold it. And that if, if those flows are larger than expected, that could boost the price of Bitcoin perhaps even well uh stock struggle and, and therefore that correlation could remain relatively low in the short term. But to your point, I think once uh once institutions reach their target allocation, that's where it could. Uh inevitably we, we've seen this march toward financialization of Bitcoin much to the chagrin of the, the original crypto pumps um that, that started it. So I, I do think that's down the road a possibility but in the short term, I, I think this demand, uh case for underlying Bitcoin could be a very bullish catalyst.

    Sources


    Article information

    Author: Vincent Sheppard

    Last Updated: 1700382842

    Views: 814

    Rating: 4.2 / 5 (94 voted)

    Reviews: 97% of readers found this page helpful

    Author information

    Name: Vincent Sheppard

    Birthday: 1933-06-13

    Address: 82732 Ashley Freeway, Port Brett, MI 97119

    Phone: +4324717936813903

    Job: Accountant

    Hobby: Golf, Robotics, Motorcycling, Playing Chess, Woodworking, Skateboarding, Backpacking

    Introduction: My name is Vincent Sheppard, I am a exquisite, cherished, spirited, treasured, priceless, artistic, transparent person who loves writing and wants to share my knowledge and understanding with you.