Cryptocurrency Native Trading Overtakes ETFs as Key Driver of Bitcoin Volume – The Armchair Trader

Bitcoin (BTC) concluded the previous week with a valuation of about $55,850, displaying an 11% fall from its closing figure of nearly $62,775 a week earlier. The week was characterized by pronounced sell-offs, with BTC’s price dipping to a low of $53,500 on Thursday. Nevertheless, it managed to recover to $58,250, finally settling at $55,850 by week’s end.

Notwithstanding the sharply negative pullback, there’s a silver lining as BTC Spot ETFs registered a sizable influx of approximately $238 million in net investments last week. The total trading volume since these funds started has hit roughly $315 billion, marking a slowdown in transactional velocity. This is congruent with expected patterns and commonplace dynamics seen in the third quarter, which traditionally observes the least trading activity. Hence, this should be viewed in context as a cyclical phenomenon common among established market participants rather than as a worrisome signal.

The notable downtrend in the broader marketplace interestingly did not mirror the capital flows into BTC Spot ETFs. In the past, these ETFs were seen as major drivers of market dynamics and closely linked to Bitcoin’s price trajectory. However, recently there seems to be a breakdown in this interrelation, suggesting the trading within the cryptocurrency-specific landscape has predominantly driven the recent pricing trends.

Unwavering consistency in on-chain crypto trading volume

This theory is bolstered by the fact that even with a reduction in BTC Spot ETF trading volumes week over week, the on-chain trading figures for cryptocurrencies have maintained a steady pace, in line with the average for the current year. The daily on-chain volume for BTC last week stood at around $41.1 billion, culminating in a weekly total of about $288 billion. Should this level of activity persist through July, the expected monthly on-chain volume would be close to $1.3 trillion, mirroring the activity of June and closely approaching the $1.4 trillion tallied in May.

“The intensified selling pressure we’re witnessing on-chain may likely stem from the initiation of Mt.Gox’s repayments, an event investors have been anticipating for an extended period,” elaborated Matteo Greco, a research analyst at Fineqia International based in Canada. “Even though recipients may face a wait of up to 90 days to access these funds, the official announcement of repayments, underscored by the verified transfer of 47,228 BTC from a Mt.Gox-linked cold storage to a presumably payment-specific new address, set off rippling market responses.”

Furthermore, miners are continuing to exert selling pressure in the wake of the recent Bitcoin halving event, which slashed mining incentives by half. Despite indications of this pressure waning, it remains above the counterbalancing demand, adding to the bearish immediate outlook.

“This latest price correction has dramatically trimmed the potential for unrealized gains, an effect primarily caused by liquidations among steadfast stakeholders.,” further noted Greco.

Currently, the MVRV ratio (market value in comparison to realised value) hovers around 1.5, epitomizing an estimated 50% unrealized gain among network actors. This number saw a rapid downshift from the ratio above 3 recorded in March, which portended unrealized gains exceeding 200%. Such a shift implies the recent price shifts have been largely influenced by veteran holders who opted to liquidate their holdings, thereby engaging new buyers at heightened valuation points and diminishing the net average of unrealized gains within the network.