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Bitcoin Market Intelligence - Issue #5

Jan Wüstenfeld
Jan Wüstenfeld
Hey everyone,  
First of all, congrats if you are still here. Over the last weeks, you have not been discouraged by the constant ranging of bitcoin’s price, and price corrections. You are going to make it!
I am glad that you are still here reading my newsletter and following Bitcoin.
In today’s issue, I will write about the ‘great “wrong” decoupling?’, bitcoin accumulation, exchange balances, and some words on the US savings rate.
Bitcoin decoupling, but probably temporary
Accumulation Trend Score indicating strong accumulation on last correction
Exchange balances stalling and partially increasing
Savings rate in US falling to low last seen in Sep. 2008
Bitcoin the great “wrong” decoupling?
Over the last week, bitcoin’s price has started to move in the opposite direction as the Nasdaq-100 and, for example IGV. While equities have traded green, bitcoin traded red.
Many have been talking about bitcoin decoupling. Some more jokingly than others, particularly when it comes to it being the “wrong” kind of decoupling.
Graph 1: Percentage Performance Year-to-Date Bitcoin, IGV and Nasdaq-100
Graph 1: Percentage Performance Year-to-Date Bitcoin, IGV and Nasdaq-100
M Ernest provides a potential explanation for the strong positive move of equities that is the closing (selling) of put options of market participants.
2- The time has come when the market has not fallen as expected and the purchases of put options are beginning to close. This causes the MM to hedge in favor of the market as a result of the negative gamma.
3- For this reason the rebound of the SPX has occurred strongly.
Whether you believe that this is the reason for the decoupling of bitcoin’s price or it simply being a relief rally of stocks, bitcoin’s price will likely see a reconnection to that of equities.
Generally, take talks about decoupling with a grain of salt. A few days of moving in opposing directions does not make a trend. It is interesting to watch, however. How long does it last? Why the decoupling? Does it appear more frequently? Is it a start of a trend? And more…
Over the weekend and on Monday, bitcoin’s price has been playing catch up with equities when financial markets in the US have been closed.
It is not unlikely that equities will give away some of their gains from last week. In my mind, if that happens, bitcoin will probably also give away some of the gains made over the weekend and on Monday (reconnection in this case).
After having discussed market correlations over the last weeks, let us talk about network fundamentals
Strong Accumulation
On the current price correction, the Accumulation Trend Score is indicating a rise in accumulation by network participants since May 11.
The Accumulation Trend Score is an indicator which reflects the relative size of entities that are actively accumulating/distributing coins on-chain in terms of their BTC holdings. […]
An Accumulation Trend Score of closer to 1 indicates that on aggregate, larger entities (or a big part of the network) are accumulating, and a value closer to 0 indicates they are distributing or not accumulating. This provides insight into the balance size of market participants, and their accumulation behavior over the last month.
The values of this metric are currently close to one or at one depending on the day you look at it. So there is heavy accumulation happening at current prices and potentially larger entities absorbing supply.
But it can only show us whether entities are accumulating bitcoin and not whether this will lead to higher prices or not.
In Graph 2 the last three years are shown and I have circled the three instances where strong accumulation has happened over that time period.
During the first two times, the price has been rising sometime after that. The first one was the Covid-19 crash in March 2020 where bitcoin’s price lost more than 50% within just two days marking the beginning of the price rise of the current cycle. The second time happened during the bull run during the second half of 2020 and the beginning of 2021.
The third time occurred around the second all-time high in November 2021 and the downward trend of the price that followed.
Following this, the Accumulation Trend Score suggesting that market participants are accumulating bitcoin does not tell us in isolation where the price might be headed.
Graph 2: Bitcoin Accumulation Trend Score (Source: Glassnode)
Graph 2: Bitcoin Accumulation Trend Score (Source: Glassnode)
As I pointed out in the last issue, it has been primarily young coins (new investors) who have been capitulating during the Luna price correction. So those who are accumulating are presumably majorly convinced, long-term holders.
While it is positive that substantial accumulation is happening around these prices, it is not enough to push prices back to new highs.
For that, either supply has to slowly be drained by long-term holders accumulating over time (which may take some time), or a significant amount of new investors need to enter the market (a catalyst might be needed for that to happen).
Under the current macro environment, the latter seems unlikely, so the most probable scenario continues to be a prolonged ranging of bitcoin’s price with further downside potential near-term. Once the supply has dried up enough, a climb in prices (possibly gradual at first) will follow.
Exchange balances stalling or partially rising
On the not-so-positive side, since the price correction during the second week of May, the downward trend of exchange balances has stalled. We have even seen significant net inflows partially followed by big outflows at times.
Yes, people are accumulating bitcoin, but there is also selling pressure coming from those depositing their bitcoin on exchanges.
Graph 3: Bitcoin Exchange Balances (Source: Cryptoquant)
Graph 3: Bitcoin Exchange Balances (Source: Cryptoquant)
Savings Rate in US Falling
I will keep it short on the macro environment, as I have already written a lot on that topic in the last issues, and the outlook has not changed significantly.
Just four weeks ago, the United States Secretary of the Treasury Janet Yellen talked about a possible soft landing of the US economy and solid growth next year.
However, orchestrating a soft landing seems to be a tough or even an impossible task (If history is a guide, the opposite of what they are saying is likely going to happen).
We are seeing the first signs of why that might be the case.
For instance, Americans’ personal savings rate dropped to 4.4 percent in April. While during the years before the financial crisis, the savings rate has at times been lower, historically, the personal savings rate has been above 4.4 percent.
It is not a sign of economic strength if US consumers cover their expenses by running down their savings and taking on credit card debt.
Graph 4: Personal Savings Rate US (Source: U.S. Bureau of Economic Analysis)
Graph 4: Personal Savings Rate US (Source: U.S. Bureau of Economic Analysis)
It seems more probable than not that the savings rate will drop even further over the coming months. It is not a good look for the US economy now and medium-term.
While this is currently not enough for the FED to reverse course, with numbers potentially worsening further in the coming months, it will become harder for the FED to tighten monetary policy.
In summary, last week, bitcoin’s price was trading in the opposite direction to equities. Still, I expect this decoupling to only be temporary, and that equities will give away some of their last week’s gains.
On the current price correction, substantial accumulation is happening, but at the same time, this has been met by bitcoin exchange net-outflows stalling and even, at times, net-inflows.
While we have seen a relief rally for bitcoin over the last few days and in the coming days price might rise even a bit further, it is too early to call the correction and ranging of the price over. Markets are still risk-off.
But on the positive side, this will give you more time to stack cheap sats.
Stay safe out there! Don’t trust! Verify! Make up your own opinion and consider multiple sources. 
Jan Wüstenfeld
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This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. The author of this article may hold assets mentioned in the piece.
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Jan Wüstenfeld
Jan Wüstenfeld @JanWues

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