Bitcoin (BTC) has surged by 21% over the past 7 days, hitting $52,000 for the first time since December 2021. This price spike is mainly attributed to the increasing flow of capital into spot Bitcoin ETF funds. Traders are speculating whether over-the-counter (OTC) trading desks are running out of their BTC reserves, forcing institutions to buy on regular exchanges and creating a supply-demand imbalance favoring price hikes.
Though the hypothesis may seem far-fetched, online data from Glassnode indicates a decrease in supply from short-term holders. If these conditions persist, Bitcoin’s price could surpass $55,000.
It’s crucial to dispel the misconception that arbitrage desks always lean long, implying they impact prices. While having a significant market position is vital for their operations, it’s often hedged using derivative contracts. Similarly, not all OTC trades necessitate buyers and sellers, as intermediaries can shift to exchange order books and futures contracts to fulfill orders. In summary, arbitrage desks’ price differential trading doesn’t necessarily alter price dynamics.
While Bitcoin ETF spot issuers added a net $1.84 billion in BTC over the past week, other institutions likely sold similar amounts. The crucial question for price formation is the desired agreement level of each party. Long-term holders, addresses untouched for over 6 months, are less likely to sell after price hikes. This is why analysts turn to on-chain analysis to gauge market recovery amidst volatility as a measure of investor confidence.
Data reveals that short-term holders, addresses holding for less than 6 months, significantly increased their trades on exchanges, averaging 49,504 BTC per day over the past week. In comparison, long-term holders only sent 2,023 BTC per day over the same period, indicating that short-term holders are the primary sellers. Although 79% of the supply is held by long-term holders, the potential for rapid sell-offs remains.
However, one could argue that whales who bought Bitcoin anticipating spot ETF launches might be taking profits, making further highs difficult to achieve. Nevertheless, data suggests otherwise.
Notably, all types of holders were net sellers over the past 7 days, except for very large whales holding over 100 BTC, likely representing institutions. These investors added a total of 20,168 BTC, worth over $1 billion, potentially due to spot Bitcoin ETF issuers like BlackRock, Fidelity, BitWise, Ark 21Shares, and others. While the sustainability of this capital flow is uncertain, data indicates increased demand for ETF products as Bitcoin prices rise, strongly supporting price momentum.
This data demonstrates that breaking $55,000 is no longer solely dependent on retail buying. Therefore, previous indicators like Google search trends or “Fear and Greed Index” may not accurately reflect institutional investors’ risk appetite and subsequent Bitcoin demand.
Short-term Bitcoin holders swiftly deposited funds into exchanges, driving the price from $42,900 to $52,000 in 7 days (+21%). Unless long-term holders decide to reduce their positions, all signs point to weakening supply conditions, paving the way for further climbs above $52,000.