Bitcoin (BTC) experienced a decline in price from $87,241 to $81,331 between March 28 and March 31, effectively undoing gains that had accumulated over the preceding 17 days. This 6.8% pullback resulted in the liquidation of $230 million in bullish BTC futures positions and followed a similar downtrend in the US stock market, with S&P 500 futures dropping to their lowest since March 14.
Despite facing difficulties in maintaining levels above $82,000 on March 31, four significant indicators suggest robust investor confidence and potential indications of Bitcoin separating from traditional markets in the near future.
Traders are apprehensive about the effects of the global trade war on economic growth, particularly following the March 26 announcement of a 25% US tariff on imported vehicles. Reports indicate that Goldman Sachs strategists have revised their year-end S&P 500 target downward for the second time, from 6,200 to 5,700, while Barclays analysts have adjusted their estimate from 6,600 to 5,900.
Despite the reasons behind the heightened risk aversion among investors, gold prices skyrocketed to an unprecedented high above $3,100 on March 31. This $21 trillion asset is widely regarded as the ultimate safe haven, especially in times when traders lean towards alternatives to cash. Concurrently, the US dollar faltered against a range of foreign currencies, with the DXY index dropping from 107.60 in February to 104.10.
Strength in Bitcoin Metrics Amid Long-Term Investor Resilience
The narrative surrounding Bitcoin as "digital gold" and an "uncorrelated asset" is being challenged, even though it has gained 36% over six months, while the S&P 500 index slid 3.5% in the same timeframe. Several key Bitcoin metrics continue to exhibit strength, suggesting that long-term investors remain undeterred by temporary correlations as central banks shift towards more expansive measures to avert an economic downturn.
Bitcoin’s mining hashrate, which gauges the computational power supporting the network’s block validation, reached an all-time peak.
On March 28, the 7-day hashrate surged to 856.2 million terahashes per second, up from 798.8 million in February. This indicates the absence of panic selling among miners, evidenced by the flow of known entities to exchanges.
Historically, downturns in BTC pricing have coincided with FUD (fear, uncertainty, doubt) regarding the so-called "death spiral," when miners are compelled to sell during unprofitable periods. Furthermore, the 7-day average of net transfers from miners to exchanges on March 30 amounted to 125 BTC, significantly lower than the 450 BTC mined daily.
In a noteworthy development, a prominent Bitcoin miner filed a prospectus on March 28 to raise up to $2 billion in stocks aimed at expanding its Bitcoin reserves and for "general corporate purposes." This follows the recent actions of a US-listed videogame company that announced a $1.3 billion plan for convertible debt while revising its investment strategy to include potential acquisitions of Bitcoin and stablecoins.
Declining Crypto Exchange Reserves
On March 30, reserves on cryptocurrency exchanges fell to their lowest levels in over six years, reaching 2.64 million BTC. This reduction in coins available for immediate trading typically suggests an inclination among investors to hold, a significant consideration given Bitcoin’s 5.1% decline over the past week.
Lastly, minimal net outflows in US spot Bitcoin exchange-traded funds (ETFs) between March 27 and March 28 point to confidence among institutional investors.
In conclusion, Bitcoin investors continue to exhibit strong confidence, bolstered by the record-high mining hashrate, increasing corporate adoption, and the lowest exchange reserves seen in six years, all signaling a trend towards long-term holding.
This text is intended for general informational purposes and should not be construed as legal or investment advice. The opinions expressed are solely those of the author and do not necessarily reflect the views of any associated entities.