Bitcoin Performs Reverse U-Turn

KEY TAKEAWAYS

  • Buying frenzy from real money pushes bitcoin price to a breakout above USD 10,000.
  • The selling orders amount to 3142.71 Bitcoins that took place within 3 minutes on Binance crashed the market.

On Tuesday, 2  June, the market witnessed a drastic U-turn of Bitcoin prices. Could it foreshadow the next market crash? Or is it just another technical correction? To answer these questions, we need to revisit ideas discussed in previous posts and take a step back to examine the larger picture.

The status quo is that real money investors in the United States, with their counterparts worldwide, are crucial marginal buyers, whereas miners remain the largest marginal sellers.

Grayscale Bitcoin Trust (GBTC), among the handful heavyweight marginal buyers, has been racking up its Bitcoin purchase since the beginning of 2020. Its net purchase from Jan to May alone tallies up to 62,587 Bitcoins, approximately 110% of its total annual purchase in 2019. Adding fuel to the persistent frenzy since January, GBTC picks up the pace further in May, buying, on average, 1,560 Bitcoins per trading day.

What drives the growing interest and inflow into Bitcoin? The Fed’s rapidly expanding balance sheet offers a plausible explanation.

Source: The Federal Reserve

Why is there a sudden dive back to USD 9,300? This could be due to the massive coin dumping on Binance. According to Chinese crypto media, AIcoin recorded 709.82 Bitcoin sale at USD10,000 on Binance at 22:46:21 BJT June 2, followed by 361.9 Bitcoin sale in 3 seconds, and 3142.71 Bitcoin sale collectively within 3 minutes.

Who are the sellers? Ki Young Ju, CEO of the on-chain crypto analytics platform CryptoQuant, pointed out the apparent relationship between the Bitcoin spot price and mining pool wallet outflows on his Twitter.

Source: Twitter

In fact, when the price hit USD10,000 on May 18, we also observed the emergence of more than 2,000 Bitcoin selling orders on Binance, providing further proof of sellers’ interests pivoting at this price.

We previously explained that even the older mining models such as Antminer S9 are profitable at current price level in “Bitcoin Mining Back to Profitability at USD9,000”. Miners have good reason to hedge (or sell) above USD10,000.

To conclude, we are still in a liquidity-driven market. However, please be mindful of selling pressure from miners.