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Bitcoin Market Intelligence - Issue #6

Jan Wüstenfeld
Jan Wüstenfeld
Hey everyone,
What wild last days for markets. Inflation numbers are coming in higher than expected in the US. With that, a 75bps rate hike is on the table, which has been shaking up markets and particularly negatively affecting the crypto market.
In this issue, I write about the ECB, the FED, the Celsius network, what this means for markets, and take a look at on-chain data.
Summary:
There are still 21 million reasons not to hold your savings in euros
FED might hike by 75bps tomorrow (Wednesday)
Markets in deep red, bitcoin losing more ground against equities
Short-term holders capitulating
Seasoned holders are holding tight
Bitcoin’s price dropping below realized price for first time since flash crash in March 2022
ECB
Last week on June 9, the ECB published their latest monetary decision.
They intend to end asset purchases by July 1 and hike their key interest rates by a mere 25bps in July, which wouldn’t even get the deposit facility rate into positive territory.
With inflation in the euro area at 7.5%, it is mind-boggling that they do not take action right now and to be frank, the intended measures to be taken in July in light of that are a joke (sorry for the harsh words, but there is no friendlier way to describe this).
Jan Wüstenfeld
For perspective:

The deposit facility rate is at -0.5% in the euro area and inflation is at 7.5%. The last time inflation was relatively high at around 4% in 2008 it was above 3%.

In July the ECB intends to hike key interest rates by only 25bps.

#EndtheECB #Bitcoin $BTC https://t.co/mveUzB097K
They appear to be hoping for inflation to come down magically and to be more worried about another sovereign debt crisis in the euro area.
For instance, the yield spread of 10-year Italian and German government bonds has risen to 2.5% over the course of the last few days (the spread is a measure of stress in European markets), and the ECB has not announced anything serious yet.
In light of that decision and a hawkish Fed, the euro depreciates against the US dollar, and it has lost 8% against the US dollar this year alone.
With the euro depreciating, imported goods for the consumer and producers, are becoming more expensive, which translates into higher prices and, in the aggregate, higher inflation. In a sense, the inaction of the ECB directly contributes to higher inflation.
As I have been saying before, there are 21 million reasons not to hold your savings in euros, which continues to hold.
Fed
As opposed to the ECB, the Fed is taking more action and/or at least pretending to fight inflation. It has already raised interest rates and will raise rates again tomorrow (Wednesday).
While a hike of 50bps was the most likely scenario last week, as of today, the chance of a 75bps hike has increased to 94,8%, according to the CME Group’s Fed Watch tool.
This is following the release of the CPI numbers in the US that came in at 8.6% year-on-year above expectations (expected 8.3%; fastest increase since December 1981).
Graph 1: Target Rate Probabilities (Source: CME Group’s Fed Watch tool)
Graph 1: Target Rate Probabilities (Source: CME Group’s Fed Watch tool)
Markets
All of this does not leave markets unaffected. Both equities and bitcoin have been falling in price. Unfortunately, bitcoin’s price has been pulling further away from e.g. the Nasdaq-100 and the IGV. Bitcoin’s price is now down 53% year-to-date.
Graph 2: Percentage Performance Year-to-Date Bitcoin, IGV and Nasdaq-100
Graph 2: Percentage Performance Year-to-Date Bitcoin, IGV and Nasdaq-100
The drop in prices has also affected the Celsius network, which is on the brink of being insolvent or is already insolvent. While the two events are hard to disentangle, there might be a feedback loop between both events (the price falling putting the Celsius network under pressure and Celsius getting under pressure accelerating the price correction).
Yet another event that highlights the importance of the following sentence:
Not your keys, not your bitcoin!
When you consider lending your bitcoin for interest, ask yourself, is the return worth the risk of a total loss of your bitcoin worth it?
More info on the Celsius network is in the Tweet thread below:
jonwu.aztec
Celsius is one of the largest centralized gateways to crypto.

It raised $864m of venture capital and at one point custodied over $3 billion of funds for 1m+ customers.

As of today, it appears insolvent, and it's taking the whole crypto market with it.

The Celsius Thread:

👇
On-chain
I do not want to go into too much detail regarding on-chain activity, but I want to share two charts. The spent volume of coins aged one week to six months reached a yearly high of almost 200k bitcoin yesterday, and this suggests that inexperienced short-term holders capitulated on that price crash yesterday.
Graph 3: Spent Volume Short- vs Long-Term Holders; 1 Year(Source: Glassnode)
Graph 3: Spent Volume Short- vs Long-Term Holders; 1 Year(Source: Glassnode)
This is getting close to levels seen during the flash crash on March 12, 2020 (see Graph 4). Coins falling into the medium to the long-term category have barely been moved in the last days as the spent volume data in Graph 3 suggests.
Graph 4 Spent Volume Short- vs Long-Term Holders; Last 5 years (Source: Glassnode)
Graph 4 Spent Volume Short- vs Long-Term Holders; Last 5 years (Source: Glassnode)
Last but not least, yesterday bitcoin’s price has moved below the realized price for the first time since the flash crash in March 2020.
“It is calculated by dividing the Realized Cap, which is the sum of all coin values at the time when they were last moved, by the circulating supply. Thus it reflects an estimate of the aggregate cost basis of all coins in the supply. (Source: Glassnode)
From an on-chain perspective, historically, this metric has indicated prices close to the bottom, and thus relatively good entry points.
While historically, it certainly is a good price point to enter the market, no one really knows where the price bottom is. Particularly as bitcoin never in its history has been in a comparable macro-environment.
So take this with a grain of salt. If inflation numbers do not come down and come in higher than expected on one of the following release dates, the FED might become more aggressive in their monetary tightening.
Ultimately, timing the exact bottom is near impossible, so if you do not dollar cost average, this may not be the worst time to scale in.
Graph 4: Realized Price(Source: Glassnode)
Graph 4: Realized Price(Source: Glassnode)
Wrapping up, there are still 21 million reasons not to hold your savings in euros. The FED is potentially hiking interest rates by 75bps tomorrow. This shift in expectations has been sending markets down, bitcoin in particular.
Short-term holders capitulated yesterday, whereas seasoned investors are holding tight.
Bitcoin’s price has dropped below the realized price which historically was a good entrance point. Nevertheless, keep in mind that today we are in a very different macro situation, and depending on how inflation evolves, the FED might be forced to accelerate tightening, which would put markets under further pressure.
I expect uncertainty and volatility to remain high in the coming weeks and see further downside potential for bitcoin’s price or at least more sideways movements of the price.
Don’t underestimate the FED in its determination to fight inflation.
Stay safe out there! Don’t trust! Verify! Make up your own opinion and consider multiple sources. 
Jan Wüstenfeld
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Also, if you want to support my work directly, consider sending me some sats via the Lightning Network. Thank you!
Lightning address:
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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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