The positive sentiment surrounding Bitcoin ETFs by crypto enthusiasts allowed Bitcoin to rally more than 53% after the US Securities and Exchange Commission (SEC) approved the first regulated spot Bitcoin ETFs on Jan. 10. However, since the rally maxed the BTC price with an all-time high of $73,679 on March 13, Bitcoin’s price has traded within the $60,000 to $70,000 range. Even with a record 19-day ETF inflow, several investors are left baffled as to why there’s little price movement.
The biggest reason for Bitcoin’s price stagnancy despite ETF inflow is a drop in long-term Bitcoin holder supply. Nevertheless, other factors like bad market timing and Bitcoin ETFs’ low Bitcoin holdings contribute to its static price movement.
Here’s an in-depth explanation of how these factors influence Bitcoin’s inactive price movement:
The 3% Reduction in Long-Term Bitcoin Holder Supply
The effect of a steady inflow into Bitcoin ETFs is getting evened out by a change in long-term Bitcoin holdings. Long-term Bitcoin holders have started to sell off their Bitcoins, with 5.26% of the total supply held by these investors getting into the hands of speculative investors.
The total Bitcoin supply held by long-term Bitcoin holders has always been viewed as a metric for how well Bitcoin will perform in the future.
Even though the 5.26% drop might seem insignificant to someone new to the crypto space, it totals 630,000 Bitcoins or $43 billion. About $15.5 billion in Bitcoin has been purchased by US ETFs since their approval, amounting to one-third of the long-term supply that’s been sold by holders.
Potentially, the sale of these Bitcoins to speculative investors could affect Bitcoin’s price in the coming months. These speculative or short-term buyers tend to take instant action once news about the crypto market pops up or the market fluctuates, and this can increase Bitcoin’s price volatility.
Short-term investors use Bitcoin for several purposes with the aim being quick financial gains. For one, they can engage in day trading on crypto exchanges, looking to exploit changes in Bitcoin’s price.
The effect of this speculative investment is far-reaching, its influence is felt beyond just crypto investing as its ability to negatively influence Bitcoin price can ripple to other establishments relying on Bitcoin with Bitcoin casino sites, which allow players to wager online using crypto, and outfits that stake Bitcoin as examples. Staking involves getting interest on a specific amount of Bitcoin locked into smart contracts. This reduces Bitcoin’s supply and can increase demand, which in turn spikes its price.
In essence, the Bitcoin sell-off to speculative investors has diluted any positive impact triggered by the positive ETF inflow since the market anticipates the possibility of quick sell-offs.
Bad Market Timing
June is typically viewed as a dull month for traders across different financial markets and the crypto market is no different. Known as a dull market, it is characterized by a drop in trading volume with very little drive to spark up a significant price movement in the market, even when traders receive good news like positive ETF inflow.
During months like June when there is low trading activity, big institutions prefer to move their money into risk-free assets, and smaller fish in the crypto market end up using fiat for their transactions instead of crypto betting or crypto shopping. Hence, volatile assets like Bitcoin receive less attention.
Bitcoin ETFs’ Low Holdings
Although Bitcoin ETFs hold about 5% of Bitcoin’s circulating supply, it pales in comparison to the 31% held by Bitcoin Whales. The decisions taken by these whales have a big impact on the entire cryptocurrency market. As of 2024, three addresses hold between 577,502 Bitcoin and 102 other addresses hold 2.4 million Bitcoin.
Whales include super investors and big institutions including the top crypto exchanges like Binance that manage their clients’ Bitcoin assets. Since whales hold most of the Bitcoin volume, their trading activities obscure any impact made by Bitcoin ETFs.
