The world’s largest cryptocurrency recorded one of the worst monthly price performances in history in June. This month, too, has been kind to it. The current market structure has many hallmarks of the later stage of a bear market. And while many bottom formation signals have formed, Bitcoin is yet to establish a “resilient” one that can finally break the streak of correction.
Redistribution of Wealth
During the long drawdown in the market, Glassnode observed a redistribution of wealth among the stakeholders. In short, Bitcoin wealth is being currently distributed from weak hands to strong hands as a result of the ongoing capitulation from retail investors and miners. This potentially indicated that a much-needed bottom may not be very far.
But with the price going under the $30k level, miners and long-term holders (LTHs) have come under substantial stress. According to a recent report by the blockchain analytics firm, the proportion of supply held by this cohort of holders reached above 34%, while the amount owned by short-term holders or STHs plunged to just 3% to 4% of supply.
It is always the LTHs that pay the most brunt in the form of massive unrealized losses. The short-term holders now hold a little over 16% of the supply in the loss. This suggests that freshly redistributed coins must now undergo “the process of maturation in the hands of higher conviction holders.”
“This indicates that whilst many bottom formation signals are in place, the market still requires an element of duration and time pain to establish a resilient bottom.”
Miner Capitulation Underway
During the late-stage bear market, miners become an integral source of selling pressure as a result of the cyclical nature of their income. Bitcoin miners are currently under income stress with an earning of just 49% as much as the 12-month average.
Due to the miners’ income stress, Glassnode observed a total distribution of 7.9k BTC from their treasuries over two months. Despite this, it is also important to note that miners have slowed their spending of late and are instead distributing from their stored treasuries at a rate of 1.35k BTC/month.
The latest figure suggests that miners hold around 66.9k BTC in aggregate in their treasuries. If the price fails to see any meaningful recovery, the risk of further distribution in the next quarter persists.