VanEck Mid-October Bitcoin ChainCheck

 

Some Takeaways for Mid-September – Mid-October:

• Our recent check of Bitcoin’s technicals and fundamentals has strengthened our conviction that bitcoin is poised for a high-volatility catch-up rally. Despite its recently subdued volatility compared to other asset classes, mounting signs—including political momentum, increasing institutional adoption, and bullish on-chain and market data—indicate the likelihood of an impending breakout.
• We noticed this month that publicly traded bitcoin miners, who now control a record ~30% of the global hashrate, have significantly increased their bitcoin (BTC) holdings. The U.S.-listed miners in our coverage added 2% to their BTC treasuries MoM in September, continuing their 11% MoM holding/buying spree from August despite increased prices. These additions coincide with an increasing number of BTC that has been untouched for 6+ months (currently in the 95% percentile vs. all-time history).
• A growing list of public companies around the world are duplicating the corporate treasury strategy pioneered by MicroStrategy (+194% YTD). Corporate holdings of BTC rose 8% last month, led by MicroStrategy and German and Japanese firms.
• We did some quantitative analysis on the predictive power between ETP flows and bitcoin price. Our findings support the conclusion that institutional flows are leading price, not following it.

• Bitcoin’s Price Action
• Bitcoin ETPs and Price Correlation
• Bitcoin ChainCheck Monthly Dashboard
• Bitcoin’s Network Activity, Adoption, and Fees
• Bitcoin Miners

Bitcoin’s Price Action

Bitcoin’s price rose by 11% month-over-month (MoM), continuing to form higher highs and higher lows since the market bottomed in August. Still, volatility remains subdued relative to other FX pairs and investable asset classes. Recent positive poll numbers for Trump appear to be leading Bitcoin’s latest rally, the impact of which can be seen in a decline in the % of coins that have moved in the last 6 months: now just 17%, in the third percentile of activity. We believe this “buy and hold” activity highlights BTC’s growing appeal as a macro-hedge, particularly among institutional investors. Indeed, BitcoinTreasuries.net data shows that public companies have increased their bitcoin holdings by ~8% since September 11th. Notable examples include Samara Asset Group’s (SRAG GY) recently announced plans to offer up to €30m in senior bonds to purchase bitcoin. Japanese real estate manager Metaplanet, Inc. rallied over 15% on October 15th after the firm announced adding another 1 billion yen worth of bitcoin, bringing their total BTC treasury to ~855 BTC (~$56 million .D). Metaplanet shares are up 675% in the last 12 months.

Moreover, exchange-traded products (ETPs) and other funds hit a record-high aggregate ownership at nearly 1.1 million bitcoins in late September, approaching the same ownership level as Satoshi Nakamoto. Lastly, in a sign the U.S .market may be opening up to banks, BNY, the largest custodian bank in the world, received an SAB 121 exemption from the SEC to custody crypto assets for digital asset ETPs, sidestepping the onerous requirement to list crypto as balance sheet liabilities. While the exception is limited, it potentially paves the way for the future of bank-custodied digital assets, pending discussions of “additional use cases” with the SEC.

• Market Sentiment: The percentage of Bitcoin addresses in profit grew by 6% over the past 30 days, with nearly nine out of ten addresses sitting on gains today. The unrealized profit/loss ratio also improved by 6%, signaling a more positive outlook compared to the summer months, despite currently sitting at a neutral 0.48 on the 7-day average. Both metrics, at the 71st and 67th percentiles of their all-time history, suggest significant room for upside potential as the next leg of the bull market develops after eight months of choppy price action.
• Bitcoin dominance: Bitcoin's dominance ticked up one point to 57%, maintaining highs not seen since April 2021 and further solidifying its status as the primary store of value within the crypto market. As detailed in last month’sreport, we think Bitcoin is uniquely positioned among crypto assets to thrive in either a pro-crypto or crypto-hostile administration. We believe ongoing hostility from U.S. regulators like Gary Gensler toward non-Bitcoin digital assets could disrupt the usual pattern of Bitcoin dominance peaking around election time. While sectors like DeFi, L1s, L2s, and GameFi have seen short-term outperformance, Bitcoin has maintained its gains more consistently, as shown in this month’s Chart of the Month. A more crypto-friendly Trump administration could potentially reverse this trend by introducing clearer regulations and de-risking investments in the more participatory proof-of-stake crypto assets.
• Regional trading: The long-term geographical trend of Asia selling bitcoin to the U.S. and Europe remains intact, with traders during U.S. and EU hours driving the strongest price performance, +2% and +4%, respectively, in the last month.

Regional Trading	MoM Change (%)	YoY Change (%)
Asia Hours Price Change MoM ($)	0	1
U.S. Hours Price Change MoM ($)	2	5
EU Hours Price Change MoM ($)	4	4

Source: Glassnode, as of 10/14/24. Past performance is no guarantee of future results.

• Funding Rates: Over the past month, the 7-day moving average of annualized bitcoin futures funding rates rose by 8%, reflecting increased risk appetite as prices recovered. At the 49th percentile of its historical range, this indicates relatively neutral sentiment—especially given bitcoin’s historically bullish market bias—suggesting room for increased leverage among aggressive traders.

Bitcoin ETPs and Price Correlation

One of the standout findings this month is the growing influence of bitcoin ETPs on the market, marking a pivotal shift in bitcoin’s market structure. U.S. bitcoin ETP net inflows totaled $19.4 billion through October 14th. The correlation between weekly ETP inflows and bitcoin's returns has shown a strong positive relationship, with an R² value of 0.3422. This trend became even stronger when analyzing weeks from July 1st – September 22nd, which yielded an R² value of 0.5791. Interestingly, we also found that daily ETP flows also showed some modest predictive power for BTC price changes in the following after-hours trading period (R² = .0527), demonstrating a spillover of US “TradFi” market momentum into the 24/7/365 crypto markets.

U.S. Bitcoin ETP Inflows Help Drive Price Discovery

Source: Farside, Glassnode, YTD through September 30th.

These findings suggest that institutional participation via ETPs is playing an increasingly important role in bitcoin's price discovery process. When examining the reverse relationship, we found a less statistically significant impact. Bitcoin’s after-hours returns (price movements overnight, on weekends, and on holidays) showed some predictive power for U.S. bitcoin ETP inflows on the following trading day (R² = 0.1261), suggestive of institutional momentum-chasing. We found this relationship strengthened on a weekly basis, with one week’s bitcoin returns explaining the variance of the following week’s U.S. bitcoin ETP inflows with an R² value of 0.3422. However, when filtering for July 1st– September 22nd, we found that there was no statistically significant relationship between bitcoin’s returns in each given week and U.S. bitcoin ETP flows in the following week. These findings underscore the idea that institutional flows are leading price, not following it.