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MikybullCrypto 296 days, 4 hours ago

First, in the quarter of 2023, Bitcoin outperformed other financial instruments with over 30% investment returns from its 2022 bottom.

Long and mid-term perspective

During the recent surge in the BTC price, long-term holders are not offloading but rather accumulating more BTC at an average of 15,000 per month. This long-term holder accumulation began in June 2022. Addresses with 0.1 $BTC and on-chain activities recorded a new ATH last month. The reason I’m sharing this fundamental aspect of Bitcoin network activities and long-term holders' bullish stance is to broaden your knowledge of mid and long-term perspectives. Let’s explore liquidity since it’s the most crucial in any financial instruments market.

Global Liquidity

The US Banking Crisis from the Backdrop of rate hikes has been the major concern at the time of writing. Let me first of all clear this common statement that has been prevailing on social media as regards the bank crisis of 2008 being less worse than 2023.

The 2008 bank crisis was far worse than in 2023 when considering the assets under management with 2023 inflation-adjusted worth. The bank crisis is just getting started. Other regional banks' stocks are on a significant decline and creating a common narrative ‘Be your bank by holding your money in Bitcoin’. The market cap of publicly traded regional banks was $425bn in January but significantly reduced to $100bn in May (-78%). The larger banks now control more than 75% of the US commercial banks' deposits. The money market interest rate is nearly 5% and while the banks offer a 0.05% average interest rate on savings accounts in the US. Apple just rolled out a 4.15% interest rate on savings accounts.

Global liquidity has returned to its usual trajectory, unlike the 2020 influx of liquidity when the Federal Reserve reduced the Federal Reserve ratio to zero in response to the pandemic. It is worth noting that this is very unlikely for the US to default on its debt. Two possible scenarios will occur before June 1 (1) Congress raising the debt (negative for liquidity). (2) Federal Reserve will start buying Treasuries which will translate to QE. I will write more about this global liquidity and China’s reopening which pumped billions of dollars into the economy.

Liquidy inflows into Crypto

I will be using Kaiko data to ascertain the liquidity inflows in the financial digital space. Hong Kong’s banking sector’s positive stance towards Crypto is another positive stimulus for liquidity inflows into crypto. The average daily volume of BTC spots in the last seven days according to K33 research was $4.8bn while the OI (BTC future and Perps) was $10.4bn. However, the trading volume on CEXs declined in April after rising for 3 consecutive months and surpassing the pre-FTX levels in March according to Kaiko data. Overall, the crypto market remains significantly larger than it was before the 2020 bull run. The 2023 recovery closely follows the 2019 price recovery. The 2018 and 2022 bear markets saw the majority of traders calling for a $1k and $10–12k bottom respectively but none was right.

2018 Bitcoin drawdown

The bottom of the BTC price in 2018 was reached on December 15, 2018, when the price of Bitcoin dropped to a low of $3,122. This followed a significant downward trend in the price of Bitcoin throughout the year, with the cryptocurrency reaching an all-time high of nearly $20,000 in December 2017 before dropping sharply in early 2018. The decline continued throughout the year, with the price of Bitcoin fluctuating between around $6,000 and $3,000 before reaching its bottom in mid-December.

Final thought

As a trader or investor in the cryptocurrency market, you should always pay adequate attention to these four metrics: (1)OI performance (2) Global liquidity, (3) US equities that have been in correlation with BTC and DXY inverse relation with BTC, (4) Stablecoin dominance and BTC spot activities. Assessing your investment and trading approach based on the above-mentioned metrics will give you an edge in this volatile market.

I will write a further in-depth analysis of those 4 metrics I listed above in separate articles in the coming weeks.

Money market holdings hit $5.31T while the US bank deposits fall by $12.5B in the week ended April 26. Deposit outflows top $360bn in the last 3 weeks. Bank runs are still accelerating while the regional banks are bearing the brunt of this negative credit cycle.

This scenario will give BTC possible room for more rise in price in the coming weeks, however, I expect the second US silk road BTC which is valued at $6bn to be sold in May or June this year. We should prepare for the downside considering the recent reaction to the false Wednesday alerts.

Congress raising the debt ceiling is also bad news for liquidity and that will give room for Fed to suck out liquidity in the market to contain inflation. The unemployment rate released today poses a negative outlook for more rate hikes.

MVRV Onchain Analysis

In January 2023, the MVRV ratio for Bitcoin broke the 1 level in an upward direction due to a substantial increase in its price, which resulted from significant accumulation in both the spot and derivatives markets.
Moreover, we have found that when the MVRV ratio breaks the 1.5 level, the 365DSMA becomes flattened before changing direction upward. Currently, it seems that we are experiencing this trend, as Bitcoin’s MVRV ratio fluctuates in the range of 1.5 values. If Bitcoin breaks the 30K price level, we can expect a rapid change in its MVRV ratio, which is likely to shift to a range of values between 1.8 and 2.

As an opaque beta asset, BTC is expected to rise in price this year within the range of $35-40k and possibly more. This is due to the unexpected volume surge witnessed in the post-2018 bear market of 2019.

Expect my article on global liquidity in the coming week. Do well to connect our social platforms






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