Editor's note: After the breakthrough of Ethereum spot ETF, the market has entered the bull market sentiment cycle again. While the amount of funds for Bitcoin spot ETF continues to grow, when Bitcoin price can break through the previous high in March has become the focus of many people again. Odaily will summarize and compile the key indicators of Bitcoin price breaking through new highs shared by 10x Research in this article for readers' reference. (Note: This article is only a sharing of 10x Research's views and does not constitute investment advice.)
Key indicators for Bitcoin price growth
For most people, the rise and fall of Bitcoin prices seem to be random fluctuations and unpredictable, but we want to point out the key drivers of Bitcoin prices. If we have a correct understanding of these factors, we can relatively accurately judge the turning points and subsequent trends of Bitcoin prices. It is no coincidence that Bitcoin prices were slightly weak in January this year, and then soared in March, but entered a consolidation state in the past two months.
Bitcoin’s critical turning point has arrived
Two weeks ago, Bitcoin entered a critical turning point.
Retail trading volume (measured in South Korea) has been weak , which shows that retail investors do not understand what is happening in the Bitcoin market and are likely to be caught up in FOMO (fear of missing out). We are confident that Bitcoin will soon reach new all-time highs, and this report and more information to come will help us convince readers that this is indeed the case.
Year-to-date, about $54.6 billion has flowed into the cryptocurrency market, including $25.6 billion in stablecoins, $15.5 billion in leveraged perpetual futures, and $13.5 billion in Bitcoin spot ETFs. Although this analysis does not cover several smaller data points, it has already sorted out the sources of most of the funds.
Below, we will show you when these flows stop, when they resume, and whether they will continue. This information will be crucial in determining the direction of Bitcoin's price (up or down).
Bitcoin and various capital flows (stable coins, ETFs, futures leverage)
Since Bitcoin completed its halving on April 20, stablecoin inflows have slowed significantly. After the halving, USDT issuer Tether completed its own inflow of $2.7 billion, while USDC issuer Circle completed an outflow of $500 million. For comparison, from the beginning of the year to now, Tether has accumulated $20.1 billion in inflows.
When the Bitcoin spot ETF began trading on January 11, we saw $611 million in net ETF inflows, with a staggering $4.6 billion in first-day Bitcoin spot ETF volume. Although stablecoin issuers have billions of dollars ready for this, January’s purchase volume is disappointing.
Part of the disappointment came from the massive outflows from Grayscale’s GBTC ETF, but the main reason was that inflation unexpectedly rose on January 11, with the CPI index hitting 3.4%, higher than the expected 3.2% and higher than the 3.1% recorded last month.
When the CPI index was released on February 13th at 3.1%, lower than the expected 3.4%, indicating a slowdown in inflation, the inflow of funds into the Bitcoin spot ETF gradually resumed. ETF inflows turned from negative to positive at the end of January, but did not begin to accelerate slightly until the release of the CPI data on February 13th. However, when inflation rose again to 3.2% on March 12th, the inflow of funds into the Bitcoin ETF stopped immediately because the market ruled out the expectation of 2-3 rate cuts.
In other words, (sort of) Bitcoin changes direction depending on whether CPI is higher than the previous month (bearish for a higher CPI, bullish for a lower CPI).
The result was a gradual decline in the price of Bitcoin from around $73,000 to around $60,000, before the downward trend was finally slowed by the comments of dovish Federal Reserve Chairman Powell on March 20. He assured the market that the Fed expects to cut interest rates three times in 2024.
A similar situation occurred on April 10 when CPI exceeded expectations of 3.4% to 3.5%, and Bitcoin fell again to $60,000, and on April 30 the price dropped to around $56,500 amid weak Hong Kong ETF flows.
As if repeating the same old trick, at the FOMC meeting on May 1, Federal Reserve Chairman Powell "took action again" to stop the downward trend of Bitcoin.
On May 15, the CPI report hit an expected 3.4% (down from 3.5% last month), but in line with expectations at 3.4%, and Bitcoin rebounded. More importantly, Bitcoin spot ETF inflows resumed. Traders who understand how Bitcoin reacts to CPI should have the confidence to trade in the opposite direction of last month's CPI index.
From March 12, when the CPI rose to 3.2%, to May 15 (a total of about 46 days), when the CPI data was consistent with the market forecast of 3.4%, the amount of funds purchased by Bitcoin spot ETFs was only US$1 billion; and since May 15, we have seen inflows of about US$1.5 billion for 7 consecutive days.
Next critical date: June 12
With the next release of CPI data scheduled for June 12, we expect Bitcoin spot ETF inflows to remain strong over the next two weeks, which should help Bitcoin reach new all-time highs.
When the market expected another disappointing increase in inflation on May 15, our model predicted a small drop in the price of Bitcoin. When we model inflation for the next two months, we may see inflation hovering around current levels and a downward trend soon. If inflation indexes to 3.3% or lower, the price of Bitcoin should set new all-time highs.
This will continue to provide "certain motivation" for Bitcoin spot ETF investors to allocate Bitcoin and support Bitcoin prices.
Our model predicts that inflation will gradually become less of a problem. It will not only become a moderately strong contributor, but it will likely become a strong contributor as we head into the end of the summer, as the model predicts that inflation will gradually decline.
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