10x Research: Bitcoin is stagnating in the current price range, where are the breakout signals?

Original Title: “Bitcoin Stuck in This Range? Or a Breakout Looms?”

Author: Markus Thielen

Compiled by: 夫如何, Odaily Planet Daily

Market Status and Key Variables

Although the price of Bitcoin is currently only 7% lower than its all-time high, traders continue to complain about Bitcoin's stagnant movement. A large amount of Bitcoin is being transferred out of exchanges, while stablecoin momentum is sending warning signals. The trading volume in the crypto market has dropped to $50 billion, with funding rates slightly positive, indicating a clear lack of trading interest.

Federal Reserve policy and inflation data are seen as two key variables driving Bitcoin to reach new all-time highs.

On June 5, the Bank of Canada may initiate a global rate-cutting cycle, providing a reference for the Federal Reserve, while the U.S. inflation data on June 12 needs to show a lower inflation rate of 3.3% for Bitcoin to potentially rise.

The chart below shows the Bitcoin funding rate (left axis, white) compared to cryptocurrency trading volume (right axis, purple, in billions):

Bitcoin Transfers and Exchange Dynamics

The sharp decline in Bitcoin reserves on exchanges indicates that large holders are moving Bitcoin out of exchanges in anticipation of price increases for "HODLing."

In May of this year, a total of 88,000 Bitcoins were transferred out of exchanges, leaving 2.5 million remaining, a new low since March 2018. The outflow of Bitcoin from exchanges began on May 15, coinciding with the 45 days after the quarterly 13F filing requirements for U.S. registered investors managing over $100 million.

Coinbase accounted for one-third of this outflow (29,000 Bitcoins), with seven of the top ten exchanges showing outflows, and only Bitfinex experiencing strong inflows (7,600 Bitcoins). At the end of May, 50,000 Bitcoins were transferred out of exchanges. These data points are bullish, and on May 27, the hash rate reached an all-time high of 657 m TH/s (slightly retreating to 602 m TH/s afterward), indicating that some mining activity remains bullish.

Miner and Large Holder Behavior Analysis

Since November 2023 (when Bitcoin was close to $40,000), the balance of Bitcoin in miner wallets has gradually decreased from 1.835 million BTC to 1.806 million BTC, stabilizing for a few weeks until the Bitcoin halving on April 20.

However, in the past two weeks, the decline in balance has increased as the reduction in block rewards has forced miners to sell inventory to cover operational costs. Bitcoin miner wallets currently hold 1.804 million BTC. Moreover, miners are continuing to sell Bitcoin.

In May, whales (holding >10,000 BTC) increased their holdings by 164,000 BTC, the highest monthly increase since January 2018 (the peak of the third bull market). Meanwhile, whales (holding 1,000-10,000 BTC) sold 118,000 BTC, the largest sell-off since December 2022 (near the bottom). Sharks (holding 100 to 1,000 BTC) sold heavily in February 2024 (165,000 BTC) but bought heavily in March 2024 (159,000 BTC). The accumulation of Bitcoin by giant whales and the movement of tokens out of exchanges are bullish signals.

Stablecoin Issuance and Market Liquidity

Looking back at the distribution of 19.7 million circulating Bitcoins: 1.77 million may be lost (a relatively stable number since 2013), giant whales (3.12 million BTC, the highest level since November 2022), whales (4.8 million), sharks (3.87 million), fish (10 to 100 BTC, 2.57 million), crabs (1 to 10 BTC, 2.13 million), and shrimp (<1 BTC, 1.42 million). This indicates that Bitcoin holders with at least 100 BTC (sharks) dominate the market, but whales (at least 1,000 BTC) are the largest holder category.

The total value of issued stablecoins is nearly $140 billion, with wallets holding over $10 million accounting for more than 50%, indicating that large investors, rather than retail traders, are driving the stablecoin (or overall cryptocurrency) market. However, two days after the Bitcoin halving, when Runes transaction fees peaked, the stablecoin balance held by whales (holding >$10 million) dropped from $76 billion to $72 billion.

Wallet holdings have stabilized and shown little volatility. Therefore, the peak of whale stablecoin holdings on April 22, 2024, may be a key turning point, indicating that large investors are either converting their stablecoins into cryptocurrencies or fiat. However, the inflow of new fiat into cryptocurrencies has stopped, which is concerning, as this has been a key driver for Bitcoin's rise from $30,000 to $70,000.

The chart below shows Bitcoin (left axis, purple) compared to the 30-day stablecoin impulse (right axis, white, in billions):

In the past 30 days, only $400 million in net stablecoin issuance has been disclosed, which is concerning, as the more aggressive stablecoin supply momentum has disappeared since Grayscale won its lawsuit against the SEC in September 2023.

Smaller wallets (holding less than $1 million) continue to increase their stablecoin holdings, either through new fiat-to-crypto conversions or, more likely, by converting their cryptocurrency holdings into stablecoins (to take profits or stop losses).

Conclusion

In summary, while smaller wallets continue to increase their stablecoin holdings, whales are quietly becoming less active and converting their stablecoins into cryptocurrencies (such as BTC) or fiat (cash out). The whale purchases of Bitcoin coincided with the large-scale stablecoin minting in April/May. Minting has now paused, and Bitcoin is being transferred out of exchanges.

This makes macroeconomic momentum a key variable. The market either needs the Federal Reserve to cut rates (unlikely, but the June 5 meeting of the Bank of Canada may provide early signals), or the inflation data on June 12 needs to be lower (we believe possibly 3.3%), which would at least lead Federal Reserve members to turn more dovish. Otherwise, Bitcoin may remain stuck in the range of $60,000 to $73,000.