Written by Mitchell Weijerman - CEO of Epic Mining.
Get ready for a journey that will make financial history as we witness an unprecedented milestone in Bitcoin's evolution. Bitcoin has not only approached but surpassed its previous all-time high, marking the beginning of a new era! This symbolizes the culmination of years of persistence, innovation and unwavering faith in the transformative power of blockchain technology.
The recent jump to new heights is a moment we all look forward to. Let's dive into the latest news from the past two weeks!
Summary:
- Attractiveness of Bitcoin ETF remains: Despite a new all-time high, Bitcoin ETFs saw significant inflows, indicating continued investor confidence.
- Debate on Bitcoin Mining: Conflicting views between Bill Ackman's concerns about energy consumption and Michael Saylor's argument that mining lowers energy costs by using stranded energy and helping grid constraints.
- World Economic Forum Praises Bitcoin Mining: The World Economic Forum highlights the positive impact of Bitcoin mining in eastern Congo, showing a shift toward recognizing its benefits.
- Closure of Hut 8 Mining Operation: Rising energy costs lead to closure of Hut 8's Drumheller facility, reflecting the mining industry's search for affordable energy.
- Bitcoin price dynamics: After crossing $70,000, the price of Bitcoin experienced volatility, highlighting caution in trading, especially with leverage.
- Bitcoin vs. Traditional Indices: Bitcoin outperforms Nasdaq and S&P 500, demonstrating its growth potential and appeal to investors seeking liquidity.
- Bullish MVRN Z-Score: Despite volatility, the market is not overheated, with significant year-over-year price appreciation.
- Modest Futures Liquidations: Recent market shifts suggest a more sophisticated investor base and a maturing cryptocurrency market.
- Sales by Long-Term Holders: Analysis indicates continued market resistance and potential for further growth despite significant sales by long-term holders.
Bi-Weekly Market Changes
25 - 02 / 10 - 03
NEWS
Investors continue to invest in Bitcoin ETF even after ATH
We've all heard it already. Bitcoin has reached its new all-time high. However, this has not stopped investors from investing more money in Bitcoin ETFs. Despite the volatility we saw on Tuesday, Tuesday also saw the fourth largest inflows since the inception of BTC ETFs, with daily flows of about $638 million. Remarkably, these ETF transactions do not directly affect the spot BTC market during regular trading hours, as transactions by authorized participants take place outside these periods.
The long-awaited breakthrough came when Bitcoin temporarily surpassed its previous all-time high of $69,000. This performance, although brief, was significant and triggered a barrage of sell orders at this level, as investors who bought at the highs tried to break even.
Bill Ackman VS Michael Saylor on Bitcoin Mining
In the recent discussion of Bitcoin energy consumption and its economic implications, several viewpoints from influential figures have highlighted the complex dynamics of cryptocurrency mining. Bill Ackman, a well-known billionaire investor, expressed concern about the potential of Bitcoin mining to escalate energy consumption, indirectly fuel inflation and affect the value of the dollar. In contrast, Michael Saylor, the CEO of MicroStrategy, responds, highlighting the often overlooked benefits of Bitcoin mining to the energy economy. Saylor argues that Bitcoin miners, rather than increasing energy costs, play a crucial role in lowering them. This counterintuitive effect stems from miners' tireless search for the most affordable sources of energy, combined with their flexibility to operate from virtually any location. By utilizing stranded energy - resources that would otherwise go unused due to logistical or economic constraints - Bitcoin mining contributes to a more efficient energy market.
Moreover, the contribution of Bitcoin miners contributes to power grid mitigation, especially in regions prone to extreme weather conditions, such as Texas. During crises such as heat waves last summer, Bitcoin mining operations can be temporarily shut down, freeing up power grid capacity for critical residential needs, such as air conditioning. In practice, this makes the grid more reliable. These arguments highlight a crucial aspect of the relationship between Bitcoin mining and the energy sector: the potential to drive technological and operational improvements that benefit everyone. By encouraging the use of surplus or stranded energy, Bitcoin mining leads to a more sustainable and efficient energy market.
World Economic Forum Understands the Positive Effects of Bitcoin Mining
More and more people are beginning to understand the positive story of bitcoin mining. The World Economic Forum (WEF) highlighted the positive impact of bitcoin mining through a recently shared video. This feature highlighted the success story of a mining operation in eastern Congo, highlighting the significant employment opportunities it has created, as well as the sustainable approach by using hydropower for operations. This presentation marks a notable change in direction from WEF's previous critical stance on Bitcoin mining energy use. Reflecting the evolving acceptance of Bitcoin as a viable asset by the financial sector, such developments indicate a broader, more favorable shift in the mainstream narrative surrounding Bitcoin mining, highlighting its potential benefits and sustainable growth opportunities.
Transition in Hut 8 Mining Operations: Facility Closure
Hut 8 has announced that it is closing its Drumheller facility, citing the rising cost of energy at their location as the main reason behind the decision. This move underscores a broader trend within the Bitcoin mining industry, with the pursuit of the most cost-effective energy sources being the main goal for bitcoin mining operations. Currently, with about 1.35 million BTC left to be mined, competition is increasing for the most affordable energy to ensure profitable mining operations. The common misconception that bitcoin mining increases energy costs for others is a misconception that overlooks a crucial aspect of the industry's operational dynamics. Instead of contributing to rising energy prices, Bitcoin miners actively seek out regions that offer the lowest energy costs
Technical Analysis
New All Time High! Next Stop: The Moon Or Mars?
Bitcoin has broken its all-time high, reaching this milestone even before the upcoming halving. This indicates an exceptionally bullish trend, and all of our hard mining efforts are already yielding significant rewards. We have broken through three key resistance levels and have now entered a phase of uncharted territory. Right now, it is uncertain how high Bitcoin can rise - is the next stop the moon, or maybe even Mars? Now is the best time to intensify our mining activities. The resistance levels we have overcome can now serve as support zones. Be careful and resist the urge to experience FOMO. The bull market is far from over. Employing a strategy of dollar-cost averaging, via mining or regular Bitcoin purchases, represents the most secure approach to investing in Bitcoin. This tactic allows you to buy the dip when prices begin to fall, optimizing your investment strategy.
Bitcoin behaves volatile after ATH
After this peak, Bitcoin quickly dropped to around $59,000, only to quickly recover and stabilize at $67,000, then climbed to $69,000. Momentum continued, with Bitcoin establishing a new all-time high, this time above $70,000, before encountering significant resistance.
This serves as a crucial reminder that if you plan to trade Bitcoin on short time frames and/or with leverage, you must be extremely careful. Volatility has wiped out positions that used leverage in both directions, and now Bitcoin is likely to continue its upward trajectory now that the path has been cleared. Even if you are in the right direction, sharp spikes like those on Tuesday and today can lead to liquidation and the shaking off of weak hands. Using leverage is now extremely risky.
BTC vs Nasdaq & S&P 500:
Bitcoin remains the outlier in the race, significantly eclipsing the performance of both the Nasdaq ($NDX) and the S&P 500 ($SPX) this week. The latter indices have shown little performance compared to Bitcoin's remarkable upward trend. The data clearly illustrates Bitcoin's significant growth potential. As financial markets become more liquid in the future, Bitcoin is poised to be the primary beneficiary of this increasing liquidity, especially with ETF mechanisms in place to meet rising demand. This positioning suggests Bitcoin as a very attractive option for investors. The larger the Bitcoin asset class is. The more interesting it becomes for risk-averse investors. In general, the larger a market is, the more interesting it becomes.
Chain Analysis
MVRN Z-Score is still bullish
There is an extreme separation between Market Cap and Realized Cap, indicating a discrepancy between price and inflows; and may signal an overheated market. The MVRV ratio is starting to gather some steam. However, the bullish winds that have propelled price 208% year-over-year are far from overheating.
We will continue to analyze this metric during the bull market to assess whether BTC is starting to overheat and let you know immediately as soon as we pick up signals that bullish momentum is waning.
Analysis of Liquidation Trends in Futures
Market volatility on Tuesday caused a notable but modest wave of futures liquidations, affecting both short and long positions. The attached charts show these liquidations, which are a stark contrast to the feverish activity in the market during the previous bull market. This suggests a shift to a more sophisticated market, with less speculative retail participation and more disciplined investors driving the current rally.
The first chart highlights the volume of liquidations of short positions, while the second focuses on liquidations of long positions. Despite these movements, overall liquidation volume is relatively low, indicating that the market is now influenced by investors who prefer a more calculated approach to high-risk speculation.
This trend points to a maturing crypto market, where more liquidity tempers extreme volatility, paving the way for sustainable growth.
Long-term Holder Sales Signal More Upward Potential
Glassnode has developed a tool that helps us see when long-term Bitcoin holders (LTH) start spending their coins in significant amounts over a 15-day period. This activity means that Bitcoins that have not moved for a long time are being sold, which can offset the effect of new people buying Bitcoin. The chart above uses different levels to show how much these long-term holders are selling. As of late January 2024, we have noticed that these holders have sold enough to affect the market 8 of the last 15 days.
If we look back at similar trends in 2017 and 2021, we saw this type of selling last between 123 and 225 days. Since we are currently 42 days into this pattern, this could mean that the market can absorb this sell-off with new buying for several more months and thus we can expect much more upside potential.
We wish you a good week and keep those mining plants running!