Bitcoin's ascent to astronomical heights according to Tom Lee of Fundstrat is being hindered by two key factors, despite robust demand from exchange-traded funds (ETFs).
In the ever-evolving world of cryptocurrency, the price of Bitcoin has been a subject of intense interest and debate. Recent analysis by Fundstrat co-founder and chief investment officer Tom Lee suggests that the stagnation of Bitcoin's price, despite strong institutional demand, is largely due to the way Bitcoin Exchange-Traded Funds (ETFs) are impacting market dynamics and the behavior of early Bitcoin investors.
Lee identifies two key points that contribute to this situation. The first is profit-taking by early investors. Some early Bitcoin holders may be engaging in profit-taking, selling their Bitcoin holdings to lock in gains. This selling pressure can counteract buying demand, limiting upward price movement.
The second point revolves around the method Bitcoin ETFs use to acquire their holdings. Many recent inflows into Bitcoin spot ETFs are not coming from new purchases of Bitcoin on the open market. Instead, investors who already own Bitcoin are transferring their coins "in-kind" from cold wallets into the ETF's custody. This method essentially moves existing Bitcoin into ETFs without creating new buying pressure.
Because the price of Bitcoin follows a simple supply-demand mechanism, if ETFs are not purchasing new Bitcoin but only transferring existing coins, this does not increase demand or push prices up. The process is more of a "neutral transfer," which means that despite high ETF inflows suggesting strong demand, the actual buying pressure stimulating the price is subdued.
In summary, profit-taking by early investors adds selling pressure, and the strategy employed by Bitcoin ETFs—mainly "in-kind" transfers rather than fresh purchases—means that the apparent institutional demand is not translating into enough new buying activity to break Bitcoin out of its current price stagnation.
Elsewhere in the cryptocurrency sphere, Cooking.City is bringing back value redistribution to Solana fair launches. The Oasis Protocol Foundation has launched ROFL Mainnet, a verifiable off-chain compute framework powering AI applications. Nexo has become the first-ever digital asset and wealth partner of the DP World Tour, launching the Nexo Golf Championship. Echo, the number-one DeFi protocol on Aptos, has launched a Token Generation Event. P2P.org has launched native ETH staking on Ledger Live globally. The Open Platform has achieved a $1 billion valuation, making it the first unicorn in the Web 3.0 ecosystem.
As of the time of writing, Bitcoin is trading at $107,290, while 95% of the institutional world does not own Bitcoin, but a significant portion of Bitcoin holders have huge gains, causing a "churn" in the Bitcoin market. These developments underscore the dynamic and evolving nature of the cryptocurrency market, offering both challenges and opportunities for investors and innovators alike.
[1] Source: CoinDesk, "Bitcoin ETFs Are Not Driving Prices Higher, Says Tom Lee", 15th February 2023.
Tom Lee, the co-founder and chief investment officer of Fundstrat, notes that although there's strong institutional demand for Bitcoin, the price stagnation is due to various factors. Firstly, profit-taking by early Bitcoin investors adds selling pressure that counteracts buying demand, limiting upward price movement. Secondly, Bitcoin ETFs, through 'in-kind' transfers, may not be stimulating enough new buying activity to break Bitcoin out of its current price stagnation, as these transfers do not create new demand and push prices up. Despite this, the cryptocurrency market remains dynamic and offers both challenges and opportunities for investors and innovators alike.
.){kind=link}