Last week, I discussed the significant buying pressure in the bitcoin market. However, it’s important to highlight another crucial source of potential demand that’s entering the scene. With the rise of Bitcoin ETFs, the continuous buying by MicroStrategy, Tether’s consistent purchasing, and the impact of the halving, it’s evident that these factors will contribute to substantial demand in the current cycle. The emergence of the “newborn 9,” which accumulated 125,000 BTC in just the first two weeks of trading, is a clear indication of this growing demand. While this demand has been partially offset by GBTC outflows, it’s unrealistic to assume that all GBTC holders are primed to sell their holdings hastily. As such, we can anticipate a reduction in these outflows in the coming weeks.
An unexpected development is unfolding in China, where the economic landscape is undergoing a significant transition. The end of an economic model in China, coupled with the crash of the real estate and stock markets, is signaling a paradigm shift. Notably, China Asset Management Company (China AMC), a major fund manager and ETF provider in China, has suspended trading on their Nasdaq 100 and S&P 500 ETFs to halt the outflow of funds into US-linked ETFs. This has had a significant impact on the market, with US-connected ETFs in Chinese markets experiencing premium prices. The flight to safety has also affected Chinese-based Japanese ETFs, underscoring the heightened state of panic among Chinese investors.
While Bitcoin remains officially banned in Mainland China, the use of exchanges like Binance and OKX, as well as OTC transactions and offshore bank accounts, continue to provide avenues for investors to participate in the market. Moreover, the recent recognition of Bitcoin by Hong Kong authorities and the influx of mainland investors into the market further illustrate the growing demand for Bitcoin as a store of value and a strategic asset allocation choice.
In light of the ongoing economic challenges in Europe, where several markets are showing signs of recession, it’s clear that Bitcoin’s appeal as a safe haven asset is gaining traction. This is particularly evident as the old economic system faces stagnation, prompting investors to turn to Bitcoin’s unique attributes, such as its fixed supply and revolutionary technological capabilities.
Focusing on Bitcoin’s price performance, while it has been disappointing since the ETF launch, it’s notable that the price has remained resilient amidst significant selling pressure from large entities. The daily RSI indicator suggests a temporary stalemate, with potential for a sell-off into support to break the 30 RSI level. The 100-day moving average is currently providing support, and historical patterns indicate the potential for a rally following this period of support.
In conclusion, the confluence of factors, including the emergence of new sources of demand from ETFs and capital flight in China, emphasizes the inevitability of increased demand manifesting in Bitcoin’s price dynamics. It’s clear that Bitcoin is being recognized as a critical asset of choice, and its potential growth during these times of economic uncertainty continues to gain prominence.
