Crypto News

Bitcoin Miners Trigger Sell-off Frenzy Ahead of Halving Event!

Bitcoin miners are rapidly selling off their Bitcoin holdings prior to the upcoming halving, leading to a significant decrease in their inventories, which have now hit a three-year low. In contrast to past pre-halving phases where miners tended to accumulate Bitcoin, the current period has seen a shift. This shift, combined with a purge of over-leveraged Bitcoin traders, has likely contributed to a temporary downturn in the price of the world’s leading digital currency.

Scheduled for April 20, 2024, the halving event occurs every four years, reducing the Bitcoin miner reward from 6.25 bitcoins per block to 3.125 bitcoins per block. The current trend of miners selling off their Bitcoin holdings before the halving contrasts with historical behaviour, likely due to the unprecedentedly high price of Bitcoin before the event. In previous halving cycles, Bitcoin prices surged to all-time highs after the halving, prompting miners to capitalise on lower prices before the event.

During the last halving on May 11, 2020, miners accumulated approximately 25,000 BTC in the five months preceding the event. However, this time around, miners are opting to secure profits earlier. According to CoinMetrics, the total Bitcoin holdings of miners fell to 1.79 million BTC last week, the lowest level since early 2021, with a reduction of 27,000 Bitcoin since November.

Simultaneously, the Bitcoin hash rate is on the rise, indicating that miners may be investing in more powerful equipment to compensate for the halving's impact, which requires increased computational power. The inability of Bitcoin to achieve another all-time high since March 14, 2024, could be attributed to this phenomenon.

Despite the reduction in Bitcoin holdings by miners, it's important to note that in dollar terms, their holdings remain at record levels, amounting to $124 billion, this is most likely due to the price of Bitcoin reaching all-time highs. The post-halving scenario and the potential for Bitcoin to reach new price highs are still uncertain, with market dynamics evolving.

Uniswap Faces Regulatory Heat: Wells Notice Issued!

Uniswap, hailed as the world's largest decentralised exchange, recently received a Wells notice from the Securities Exchange Commission (SEC). This notice, named after John Wells, the former SEC general counsel, signifies the SEC's contemplation of enforcement action against an entity or individual. Uniswap Labs operates a decentralised exchange protocol on the Ethereum blockchain, facilitating cryptocurrency transactions without intermediary involvement. This allows users to trade directly from self-custodial wallets, bypassing centralised exchanges. Now, Uniswap has the opportunity to rebut and present arguments against potential enforcement actions.

Marvin Ammori, Uniswap’s chief legal officer, contests the SEC's jurisdiction over their decentralised platform and products. He argues that if the SEC possessed regulatory authority, clearer guidelines and regulations would have been established. However, in his view, the regulatory landscape remains ambiguous. The SEC has been investigating Uniswap since 2021 for potential violations of securities laws. Uniswap Labs maintains that they are only responsible for the front-end interface development, distancing themselves from the underlying protocol. According to them, neither their protocol, web app nor wallet meets the legal definitions of securities exchanges or brokers.

This isn’t the first time the SEC has scrutinised cryptocurrency exchanges, with previous notices sent to industry giants like Coinbase and Binance. The implications of the SEC's notice on Uniswap are significant for the entire cryptocurrency ecosystem. The news of the Wells notice caused Uniswap's value to plummet by 22% within 24 hours, reflecting the uncertainty and volatility inherent in the regulatory landscape surrounding cryptocurrencies.

Bitcoin Spot ETFs Hit Brakes: Growth Slows Down

Grayscale, a leading investment firm, continues to experience significant outflows from its Greyscale Bitcoin Exchange Traded Fund (GBTC). Since the launch of all 11 Exchange-Traded Funds in January of this year, the total outflow has surpassed $16 billion. Last Friday alone witnessed the withdrawal of $166 million and 2,500 Bitcoins from the fund. Throughout April, daily outflows averaged between $75 million and $300 million. This trend reflects a broader slowdown in inflows across all ETFs, likely attributable to the overall decline in Bitcoin-related investments.

One notable factor contributing to the outflows is Grayscale's comparatively higher fees compared to other Bitcoin Spot ETFs. For instance, BlackRock's Bitcoin Spot ETF, the IBIT, has recently surpassed $15 billion in assets under management. This development suggests that BlackRock may be capturing market share from Grayscale due to the latter's fees, which stand at 1.5% annually, considerably higher than the industry average of 0.30%.

Michael Sonnenshein, Grayscale’s CEO, has shown reluctance to reduce fees. He argues that new products often generate excitement upon launch, and he anticipates a similar pattern with the GBTC. However, over time, investor focus tends to consolidate around a select few offerings.

With the Bitcoin halving scheduled within the next week and recent volatility in the cryptocurrency markets, Grayscale is likely banking on a reversal of fortunes post-halving.

Crypto Analysis

Bitcoin (BTC)

As we embark on this week's analysis, it is evident that predicting the direction of Bitcoin, the world's largest digital asset over the last few weeks, is a challenging task. Bitcoin has been producing more fake-outs than a street magician with a deck of transparent cards, constantly oscillating above and below the 10-day exponential moving average (EMA) with bewildering frequency. It's akin to navigating a maze of uncertainties, where the only constant is the unpredictability of the market. Whether you're actively trading or holding onto your investments (hodling), the key principle remains the same: trade based on what you see and that can be an extremely tough proposition under these circumstances. 

The previous week concluded on a positive note, with Bitcoin closing at $69,360, tantalisingly close to a new all-time high. The anticipation of this milestone was palpable, fuelled by a surge above daily retracements. However, the euphoria was short-lived as Bitcoin swiftly plummeted from $72,797 before experiencing a precipitous drop which turned into an even larger crash on Saturday night. This sudden downturn appeared to purge over-leveraged long positions, firstly with altcoins bearing the brunt of the fallout and suffering, witnessing declines of over 20%. Friday, in particular, painted a grim picture, with the entire crypto market awash in red. The slide on Saturday night, based on world-dominating fundamental news in the Middle East, sent Bitcoin plummeting towards major support shown by the horizontal green-shaded pattern. 

Bitcoin broke its initial support level of around $65,473, indicated by the black horizontal line. Price has climbed back above that resistance at the current time of writing on early Monday morning. The flattening of the 50-day EMA signalled a possible shift from positive to negative, albeit punctuated by pronounced daily fluctuations. While trading volume remains average, Friday's downturn saw a slight uptick in activity, and the RSI heading towards oversold territory, suggesting that price could soon try to make a possible short-term bottom.

A closer examination of the 8-hour chart revealed a false breakout (fakeout) to the upside on April 24th followed by a retreat below the apex of a triangular pattern. Although a downside break seemed probable after the failed upside break, no one could have calculated the severity of Saturday’s drop to the downside of the triangle, recent market behaviour underscores the potential for surprises. 

Presently, there are no discernible divergences in momentum indicators, with price action and the RSI signalling higher highs. However, a decisive break and close below the blue horizontal daily support at approximately $59,000 would constitute a significant setback and as we currently sit at that support line, we have to watch this increasingly important support level more closely than we have previously. I eagerly anticipate revisiting the Bitcoin chart in the coming week.

BTC.D (excluding major stables), BTC.D (including major stables) & Stablecoin Chart

This week, I've opted to take a brief examination of three interconnected charts: the Bitcoin dominance charts, excluding stablecoins; the dominance chart including stablecoins; and an update on the primary stablecoin chart.

Commencing with the Bitcoin dominance chart, inclusive of major stablecoins, a significant development emerges: we've breached a complex parallel trend channel to the upside. Termed "complex" due to intermittent breakouts both upwards and downwards, the price has consistently reverted within the channel over the months. Now, the crucial question that arises is whether the magnitude of the breakout at this juncture nullifies the pattern? Due to the distance between the top of the breakout and the pattern, I would be inclined to suggest it has been nullified.

The Bitcoin dominance chart, excluding stablecoins, mirrors a strikingly similar scenario to the one described above, the difference being a 6-month rectangular consolidation pattern and marked by a succession of green and blue candles. Given the upward breakout, it might be prudent to anticipate a possible retest of the breakout area and a potential period of consolidation before the next move. At the current time of writing on early Monday morning, price is indeed heading towards that area of support.

Examining the weekly dominance chart, excluding stablecoins, reveals that the daily breakout represents merely a segment of a broader uptrend in Bitcoin dominance representing higher-highs since the beginning of 2023. A distinct rebound from the 50% retracement level, spanning from the highs of December 2020 to the noteworthy lows of September 2022, situated at 56.24%, suggests a potential temporary bounce. The subsequent critical resistance level appears around 58%, illustrated by the blue horizontal line and green arrow, followed by the 0.618 Fibonacci retracement at 60.34%. These levels mark significant milestones to monitor in gauging Bitcoin's dominance trajectory and possible areas of interest and turning points.

Concluding with the stablecoin chart, a significant structural breach was observed above the 6.22% level shown by the blue arrows on the chart below, yet it has since reverted below it as of the present moment, early Monday morning. This oscillation once again reflects the indecisiveness prevailing in the market. It will be interesting to note whether it can reclaim that significant level over the next few hours or days. A continued upward momentum would likely lead to an influx into stablecoins, potentially driving the price towards the upper horizontal resistance line, denoted by the green arrows, around the 7% mark. Monitoring these dynamics will provide valuable insights into the future movements of stablecoins.

Polkadot (DOT)

This week, among the myriad of altcoins available, I've singled out Polkadot for discussion. It serves as a prime example of how several leading coins have responded to the prevailing market conditions. Within a span of just over a month, we've witnessed a staggering 52% decline. This recent downturn demands serious attention, considering its rapidity over the weekend. Traders who have maintained long positions in the market are likely grappling with both trade losses and diminished profits.

It's crucial to acknowledge that Polkadot found support at a critical juncture, hovering around $6.30. This is unmistakably evident in the four blue arrows and the green shaded support zone depicted in the initial chart below. Given this context, the present moment could present an opportune time for a potential reversal. However, it's imperative to exercise utmost caution, given the breakneck pace of the recent price movements over the weekend. Moreover, the elevated volume accompanying this recent downturn provides another reason for prudence.

Despite the oversold condition indicated by the RSI momentum oscillator, it's important to recognise that an oversold signal alone does not guarantee a market reversal. Indeed, such indicators can persist in oversold territory for extended periods. Additionally, the Visible Range Volume Profile indicates higher than average trading activity at the current price level.

The weekly chart for Polkadot paints a rather bleak picture from a bullish perspective. We can observe a notable spike at the critical 0.618 Fibonacci level over the weekend, derived from the substantial swing low in October 2023 up to the 21-month swing high, positioned at $6.76. This area is currently experiencing heightened activity, with the price surging within its vicinity.  

Should we witness a weekly closure below the blue horizontal support line, as indicated by the blue arrows, it could spell significant downside for Polkadot. Such a scenario might propel us towards revisiting the October lows soon. 

Amongst the bearish sentiment, it is still important to take note that the strong support can lead to a turn of events and indeed, we are achieving a bounce on early Monday morning but considering the sheer brutal force of this recent down move, caution may be warranted. 

In Summary

Taking all factors into account—the significant decline in Bitcoin, an even more pronounced drop in altcoins, and the structural break observed in the stablecoin chart—it's evident that a flight to safety has transpired over the weekend. Undoubtedly, the unpredictability inherent in cryptocurrency markets renders certainty elusive. We have certainly witnessed a bounce over the last 24 hours, which is extremely positive. As we approach the upcoming week, it's shaping up to be a captivating, if not tumultuous, period. Here's to wishing everyone a happy and productive week ahead, navigating through the ever-evolving landscape of the crypto world.

Macro News & Analysis

Overall sentiment leaned risk off with last week with equities falling for a second consecutive week and the dollar, Treasuries and gold all rallying. Despite hot CPI and escalating geopolitical tensions in the Middle East, markets have held up well with dips being bought. Last week’s bearish engulfing candle on Thursday so far hasn’t proved to be the turning point it could have been indicating.

The US markets are currently in a stock buyback blackout period during earnings releases which provides another positive signal that these dips are being bought by investors and traders rather than the companies themselves. On the other hand, insider selling is at record levels although that’s to be expected with such a sharp rise in equity prices.

PAXG Surges on Geopolitical Tensions

PAXG, Paxos’ physical gold backed cryptocurrency, reached a record high on Saturday after Iran launched strikes on Israel whilst bitcoin and crypto sold off in a typical flight to safety trade. The price action in PAXG however was unexpected and not correlated with the physical price as spot gold markets don’t trade on Saturdays.

PAXG is the second largest gold token after Tether’s XAUT which wasn’t affected by the move in PAXG.

Hong Kong Grants Spot BTC, ETH ETFs Conditional Approval

In separate statements issued Monday, Harvest Global Investments and a joint venture between HashKey Capital and Bosera Asset Management announced initial approvals of spot bitcoin and ether funds. The Hong Kong unit of China Asset Management has also said it’s received approval from the Securities & Futures Commission to provide virtual asset management services.

Whilst details of the conditions placed on these applications were not given, this is another step forward in bitcoin and crypto adoption into traditional finance. Also notable is that, in contrast to the SEC’s cash redemption stipulation, these Hong Kong ETFs have in-kind subscription and redemption, meaning the underlying BTC & ETH assets can be traded in and out of the funds.

The Week Ahead

After markets’ initial response to headlines of Iran’s attack on Israel, things have settled. Jordan, the US and UK all intercepted many of the missiles and drones before they got to Israel, where only a few were able to breach Israel’s Iron Dome defence system. The damage was minimal though. Saudi Arabia have spoken to Iran and the US talking with Israel to calm tensions and avoid a full-blown regional war. Iran has lifted its suspension of domestic and international flights and Brent crude’s initial spike has recovered to below $90/barrel. US futures are up and bitcoin and crypto are making solid gains on the weekend’s sell-off so it looks good for the week ahead, although price action when US markets open at 14:30 UK time will be the test.

Economic Calendar

Monday

• Japan machinery orders

• Eurozone industrial production

• US retail sales ex-autos, NY Empire State manufacturing, business inventories, NAHB housing index

• Federal income taxes due in the US

• IMF/World Bank spring meetings start in Washington

• Fed’s Logan, Daly speak

• ECB Lane speech

Tuesday

• China property prices, retail sales, industrial production, GDP

• UK jobless claims, unemployment, avergae earnings

• Canada CPI, housing starts

• US building permits, housing starts, industrial production

• IMF/World Bank spring meetings

• BOE Bailey speech

• BOC Macklem speech

Wednesday

• Japan Tanken index, balance of trade, exports

• New Zealand home sales, CPI

• Eurozone CPI

• UK CPI

• IMF/World Bank spring meetings

• Fed Mester speech

• BOE’s Bailey, Haskel speak

Thursday

• Australia unemployment, RBA bulletin

• BOJ Noguchi speech

• US initial jobless claims, Philadelphia Fed manufacturing, existing home sales

• IMF/World Bank spring meetings

• Fed’s Williams, Bostic speak

Friday

• Japan CPI

• UK retail sales

• India’s elections begin

• IMF/World Bank spring meetings

• BOE Breeden, Ramsden speak

• Fed Goolsbee speech

Earnings Calendar