10x Research Report: When Will Bitcoin Reach New Highs? It Depends on This Key Indicator

Author: 10x Research

Compiled by: Wenser, Odaily Planet Daily

Editor’s Note: After significant progress with the Ethereum spot ETF, the market has once again entered a bullish sentiment cycle. As the funding for Bitcoin spot ETFs continues to grow, when Bitcoin's price will break through the new high set in March has become a focal point of attention for many. This article summarizes the key indicators for Bitcoin's price breakthrough shared by 10x Research for readers' reference. (Note: This article is solely a sharing of views from 10x Research and does not constitute investment advice.)

Key Indicators for Bitcoin Price Increase

For most people, the fluctuations in Bitcoin's price seem random and unpredictable, but we want to point out the key driving factors behind Bitcoin's price. If we have a correct understanding of these factors, we can relatively accurately judge the turning points and subsequent trends of Bitcoin's price. Bitcoin's price showed slight weakness in January this year, surged in March, but has entered a consolidation phase in the last two months, which is not a coincidence.

The Key Turning Point for Bitcoin Has Arrived

Two weeks ago, Bitcoin's trend entered a critical turning point.

Retail trading volume (measured by the Korean market) has remained weak, indicating that retail investors do not understand what is currently happening in the Bitcoin market, and they are likely caught in the greed of FOMO (fear of missing out). We are confident that Bitcoin will soon reach a new all-time high, and this report, along with more information to follow, will help us persuade readers that this is indeed the case.

Since the beginning of the year, approximately $54.6 billion has flowed into the cryptocurrency market, including $25.6 billion in stablecoins, $15.5 billion in perpetual futures leverage, and $13.5 billion in Bitcoin spot ETF inflows. Although this analysis does not cover several smaller data points, it has organized most of the funding sources.

Below, we will show you when these fund 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 Fund Flows (Stablecoins, ETFs, Futures Leverage)

Since Bitcoin's halving on April 20, the inflow of stablecoins has significantly slowed. After the halving, USDT issuer Tether recorded an inflow of $2.7 billion, while USDC issuer Circle experienced an outflow of $500 million. In comparison, Tether has accumulated a total inflow of $20.1 billion from the beginning of the year to now.

When the Bitcoin spot ETF began trading on January 11, we saw a net inflow of $611 million in ETF funds, with an astonishing trading volume of $4.6 billion on the first day. Although stablecoin issuers had prepared billions of dollars for this, the purchasing trading volume in January was disappointingly low.

Some of the disappointment stemmed from the significant outflow of Grayscale's GBTC ETF, but the main reason was the unexpected rise in inflation on January 11, with the CPI index reaching 3.4%, higher than the expected 3.2% and also above the previous month's recorded 3.1%.

When the CPI index was announced on February 13 at 3.1%, lower than the expected 3.4%, indicating a slowdown in inflation, the inflow of Bitcoin spot ETF funds gradually resumed. The ETF fund inflow turned positive at the end of January but only began to accelerate slightly before the CPI data release on February 13. However, when inflation rose again to 3.2% on March 12, the inflow of Bitcoin ETF funds immediately stopped, as the market discounted the expectation of 2-3 rate cuts.

Bitcoin price trends and market sentiment division over the past six months

In other words, (to some extent) Bitcoin changes direction based on whether the CPI is higher than the previous month (high CPI is bearish, low CPI is bullish).

As a result, Bitcoin's price gradually fell from around $73,000 to around $60,000, and the downtrend finally slowed under the influence of dovish Federal Reserve Chairman Powell's remarks on March 20. He assured the market that the Fed expects to cut rates three times in 2024.

On April 10, when the CPI exceeded expectations at 3.5% (up from the previous month's 3.4%), a similar situation occurred, and Bitcoin fell again to $60,000, dropping to around $56,500 on April 30 amid weak ETF fund flows in Hong Kong.

Repeating the same pattern, at the FOMC meeting on May 1, Fed Chairman Powell "intervened again" to halt Bitcoin's downtrend.

On May 15, the CPI report met expectations at 3.4% (lower than the previous month's 3.5%), and Bitcoin rebounded accordingly. More importantly, the inflow of Bitcoin spot ETF funds resumed. Traders who understand how Bitcoin reacts to CPI should have confidence in trading in the opposite direction relative to the previous month's CPI index.

From the CPI rise to 3.2% on March 12 to May 15 (about 46 days), when the CPI data aligned with the market forecast of 3.4%, the purchasing volume of Bitcoin spot ETF funds was only $1 billion; however, since May 15, we have seen continuous inflows of about $1.5 billion for seven consecutive days.

Next Key Time Point: June 12

With the next CPI data release scheduled for June 12, we expect Bitcoin spot ETF inflows to remain strong in the next two weeks, which should help Bitcoin reach new all-time highs.

When the market anticipated that inflation on May 15 would again disappointingly rise, our model predicted a slight decline in Bitcoin's price. When modeling inflation for the next two months, we may see inflation hovering at current levels, with a downward trend emerging soon. If the inflation index reaches 3.3% or lower, Bitcoin's price should set a new all-time high.

This will continue to provide "some momentum" for Bitcoin spot ETF investors to allocate Bitcoin and support Bitcoin's price.

According to our model, inflation will gradually cease to be a problem. It will not only become a moderately strong supporting factor but is likely to become a strong factor as we move into late summer—because the results predicted by the model indicate that inflation will gradually decline.