BITCOIN: CRASH OR CORRECTION?

Bitcoin dropped 14% in April, while ETH/BTC rose 1.25% during the same period. Typically, halving events have spurred bull markets in Bitcoin, and hence, one can say that the current performance of BTC is disappointing. But who is to blame? It appears that ETFs are at fault.?

Spot Bitcoin ETFs were the main drivers of Bitcoin since the start of the year, and April not only saw the demand drying up, but in fact, the ETFs have now become net sellers of Bitcoin.?

The launch of Spot Bitcoin and Ethereum ETFs in Hong Kong also posted disappointing figures, with a mere $15 million in trading volume and $8.5 million in inflows on the first day.?

Is this a Bull market correction? Or has the rally ended? Let's try to find out.?

Bitcoin, unlike traditional stocks, doesn't adhere to quarterly cyclicality. Instead, it operates on a four-year cycle tied to its halving events. As Bitcoin becomes increasingly monetized through ETFs, it mirrors stock market behaviors more closely.?

Bitcoin's 30D correlation with the S&P 500 and Nasdaq Composite in April leapt from nearly zero to 0.6. Higher-than-expected PCE numbers, disappointing US GDP growth, and hawkish comments from U.S. Federal Reserve Chairman Jerome Powell drove this change. These developments drained the momentum from the expanding market, leading to a significant drop of over 10% in crypto values and 3.6% in the S&P 500.?

Apart from macro factors, ETFs tell another story. US ETFs have experienced general outflows since the halving, with the leader BlackRock also recording net losses over the past several days.?

Not only do macro factors and ETFs contribute to Bitcoin's disappointing performance, but miners' capitulation does as well. Miner holdings have continued to decline since the beginning of the year, even as Bitcoin's market cap has soared. You can read about their correlation here. Additionally, post-halving, as miners manage and adjust to reduced revenues, they continue to sell more than 100% of their mined Bitcoin.?

Hash price, or miner revenue per Exahash has also reached its lowest ever, hitting $48,698 per Exahash per day, a 54% decrease from its post-halving peak. It is estimated as the daily miner incomes based on their contribution to network hash-power. We calculate it by taking the ratio of total USD or BTC-denominated miner income (subsidy and fees) and dividing it by the current hash-rate (in EH/s).??

Following the halving, miners enjoyed a brief respite as Bitcoin's price increased, but their profits are now under severe pressure post-halving as the spot BTC price moves against them. However, miners manage this situation by hedging hash price by leveraging hash price futures on Luxor, which remained in contango until last week, indicating that traders expect an increase in the BTC price in the coming months.?

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When we look at on-chain metrics, it gives us insightful data that will help us further understand current market dynamics:??

The RHODL Ratio measures the relationship between the RealizedCap HODL bands from the past week and those from 1-2 years ago. Additionally, it adjusts for the increase in supply by factoring in the total market age. A high RHODL Ratio often signals an overheated market and can help investors time the peaks of market cycles.?

The Realized HODL Ratio tracks market extremes and has significantly decreased from 5,520 to 3,521 over the last 30 days, marking a 36.01% reduction. However, a recent uptick in the past seven days suggests a resurgence of bullish sentiment. This improvement aligns with a decrease in Reserve Risk, indicating that the current price is becoming more attractive to long-term holders. These changes are likely to influence hodling behaviors and present a more appealing risk/reward scenario for new institutional investors.?

A decrease in the 90-Day Coin Days Destroyed metric reinforces this bullish theory. Coin Days Destroyed is a measure that quantifies the economic activity of Bitcoin by considering the age of coins moved. A significant decrease in this metric indicates that older coins are moving less frequently, suggesting that long-term holders are not selling their holdings. This reduced movement of older coins is a bullish sign, implying that strong hands are returning to the market and potentially stabilizing or driving up prices.?

The STH and LTH Supply metric also provides valuable insight, despite its relatively stable trend. This metric assesses the distribution of Bitcoin supply of short-term holders (STH) and long-term holders (LTH). The slight downward movement aligns with a bull market and the redistribution of holdings among long-term holders. However, it's noteworthy that the current level surpasses the previous All-Time High (ATH), indicating sustained investor confidence. Moreover, there has been a notable increase in STH supply since the beginning of the year, which has now plateaued alongside the price retracement.?

While such market pullbacks are common, they are significant indicators for assessing our position in the bull market. We may be on the verge of entering the parabolic stage, signifying a potential surge in market activity.?

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