Brief-term growth as ETFs grow in popularity

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The winds of change are blowing in the Bitcoin market, bringing a up-to-date wave of short-term investors, while experienced cryptocurrency holders remain steadfast in their beliefs.

A recent Bitfinex Alpha report reveals a fascinating dichotomy in investor behavior: up-to-date players chase quick profits, and seasoned hodlers (hold on for life) accumulate for the long haul.

Figure 1. Spot Bitcoin ETF flows through various providers in the US. (Source: Farside UK)

Brief-term growth fueled by the ETF craze

Spot Bitcoin ETF, financial instruments that reflect the price of Bitcoin, proved to be a breakthrough. These readily available options are attracting a up-to-date type of investor focused on short-term profits.

This inflow is observable in a significant augment in the number of short-term holders (those who hold Bitcoin for less than 155 days). Since January, their holdings have skyrocketed by almost 55%, indicating a piercing augment in speculative activity.

But with this newfound enthusiasm comes a caveat. Brief-term investors, by their nature, are more sensitive to price fluctuations. A sudden market correction can trigger a sell-off, causing price volatility. The report highlighted this weakness, emphasizing the need to exercise caution amid the current market sentiment of “greed” (as measured by the Fear & Greed Index).

Long-term holders: diamonds in the rugged

While the short-term scene is buzzing with activity, long-term holders continue to demonstrate unwavering faith in Bitcoin’s potential. These digital veterans who have survived previous market cycles have shown an extraordinary buying spree following the initial release of some shares on the Bitcoin exchange highest ever in March.

The report further highlights this bullish sentiment by pointing out the minimum amount of Bitcoin held by long-term investors that has been purchased above the current price point. This implies a “hodling” mentality, where investors are confident that the current price is a good starting point for future profits.

BTCUSD trades at $67,543 on the daily chart:

Additionally, Bitcoin whales (gigantic investors holding significant amounts) are mirroring their pre-2020 bull behavior by aggressively accumulating Bitcoin, indicating a potential repeat of the previous market recovery.

Navigating cross currents

The current Bitcoin market presents a unique situation. On the one hand, the inflow of short-term investors provides an injection of fresh energy and liquidity. However, their presence also introduces the risk of increased volatility. On the other hand, long-term holders continue to be the backbone of the market, providing stability and certainty.

Bitcoin price forecast

The Bitfinex Alpha report coincides with a forecast based on technical analysis, predicting: potential augment in the price of Bitcoin by 29.51%, reaching $87,897 by July 13, 2024.

However, the report also acknowledges the mixed market sentiment, with the Fear and Greed Index remaining in the “Greed” territory. This highlights the need for caution as investor optimism can sometimes precede price corrections.

Featured image from VOI, chart from TradingView


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