Opening bell │ #31 │ 15th October

Report highlights:

Bitcoin started off with a bang this week, increasing by over 4% on Monday alone. Overall, however, markets have been moving sideways since the crypto hit its all-time high. There are a few points one can gather from the data, which mostly take a very neutral stance. For starters, the 'Fear and Greed' index has registered 2024 as Bitcoin's greediest year yet, so it's normal to expect some cooling off. Its drawdowns are similar to those seen in the 2015-17 cycle, but most importantly, the demand/supply balance has been moving sideways for over six months, just like the price.

Technical analysis 

Bitcoin’s most ‘greedy’ year, more up, down and sideways price action to come?

Crypto traders are getting itchy looking at Bitcoin trade sideways for the majority of the year. But considering the fact that Bitcoin has a 40%+ year-to-date return, almost double the return of the S&P500, one would think investors are sitting happy. The Fear and Greed Index that sways with momentum has seen the most days in Greed territory in almost a decade. As Bitcoin continue to trade in Neutral territory for now, the chances that it mimics the outcome of 2023 is considerable.

% of days Bitcoin has spent in each fear & greed index group

Bitcoin

Bitcoin bull market cycle drawdown see resilience in comparison to previous runs.

Recent market movements, including a notable one-day sell-off to around $60k, one of the largest since early 2022, underscore the challenging nature of this period. The market's ability to rebound showcases depth and liquidity, particularly during off-hours when traditional markets are closed. The maximum drawdown observed during this cycle stands at -26%, which, while considerable, aligns with or slightly undercuts previous bull market corrections, suggesting a market that's navigating through one of its toughest phases yet.

Market analysis 

Bitcoin ETFs setting foundational price discovery structures amid softer market demand.

In 2024, Bitcoin’s market dynamics reflect an intriguing blend of price sensitivity to exchange reserves and the influence of external demand factors. Analyzing the correlation between Bitcoin’s price and the USD value of exchange reserves reveals a near-perfect relationship, indicating that price movements align closely with changes in the USD valuation of Bitcoin held on exchanges. This high correlation suggests that price is reactive to shifts in reserve levels rather than driven by independent short-term demand.

As reserves fluctuate, the USD value moves proportionately with price, pointing toward a market largely shaped by reactive trading rather than structural demand.

When examining BTC reserves in terms of quantity, however, a different picture emerges. Reserves have remained relatively stable from 2020 to 2024, fluctuating within a narrow range despite major price swings.

But looking at the dynamics of exchange reserves, including the new inflation by miners, and the increased demand from ETF buyers this year shows that the sideways price movement of Bitcoin since its peak is very closely aligned to the visible market supply balance (see chart).

In a typical high-demand scenario, we’d expect reserve depletion as buyers remove BTC from exchanges for long-term holding, signaling strong accumulation, which indeed occurred from January through to Bitcoins All-Time-High. Since then, however, price swings have moved sideways, as has the overall available supply.

This stability suggests a market where price follows reserve availability closely, without the pressure of significant outflows Thus, while exchange-reserve-linked price sensitivity is high, the underlying demand structure appears to be evolving, potentially creating a more resilient price foundation.

Bitcoin exchange reserves since 2020

Correlation of changes in Bitcoin price to changes in exchange reserve balances

Economic calendar

Key events this week: key events coming out of Europe this week

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