The world’s largest cryptocurrency recorded one of the worst monthly price performances in history in June. This month, too, has been kind to it. The current market structure has many hallmarks of the later stage of a bear market. And while many bottom formation signals have formed, Bitcoin is yet to establish a “resilient” one that can finally break the streak of correction.
Redistribution of wealth
During the long market downturn, Glassnode observed a redistribution of wealth among stakeholders. In short, Bitcoin wealth is currently being distributed from weak to strong hands due to the ongoing capitulation of retail investors and miners. This potentially indicated that a much-needed fund might not be far off.
But with the price going under the $30k level, miners and long-term holders (LTHs) have come under substantial stress. According to a recent report by the blockchain analytics firm, the proportion of supply held by this cohort of holders reached above 34%, while the amount owned by short-term holders or STHs plunged to just 3% to 4% of supply.
LTHs still pay the most in the form of massive latent losses. Short-term holders now hold just over 16% of the supply at a loss. This suggests that the freshly redistributed coins must now undergo “the process of maturing in the hands of holders of higher convictions”.
“This indicates that whilst many bottom formation signals are in place, the market still requires an element of duration and time pain to establish a resilient bottom.”
Capitulation of miners in progress
During the latter stage of the bear market, miners become an integral source of selling pressure due to the cyclical nature of their earnings. Bitcoin miners are currently income constrained with income just 49% above the 12-month average.
Due to the miners’ income stress, Glassnode observed a total distribution of 7.9k BTC from their treasuries over two months. Despite this, it is also important to note that miners have slowed their spending of late and are instead distributing from their stored treasuries at a rate of 1.35k BTC/month.
The latest figure suggests that miners hold around 66.9k BTC in total in their treasuries. If the price fails to see a meaningful recovery, the risk of a new distribution in the next quarter remains.
