With MSTR concerns assuaged, look to traditional signals around BTC
By Martin Gaspar, senior crypto market strategist, FalconX
The recent concerns surrounding MSTR have been addressed, allowing investors to shift their focus back to traditional signals in the BTC market. This shift is particularly timely as BTC is poised for a market bottom and a potential turnaround.
In the past, BTC's 4-year cycles have been driven by distinct selling pressures. In 2018, the market overvalued crypto projects, leading to selling as participants realized the reality. In 2022, leveraged blow-ups at Celsius and FTX forced sellers, impacting crypto prices. The recent overhang was MSTR, whose evolving capital structure raised concerns about potential BTC sales to meet dividend obligations. However, MSTR has taken concrete steps to address these concerns, shoring up its USD reserve and updating its capital allocation strategy, providing a much-needed respite for BTC.
The BTC story remains relevant as ever, with its role as sound money becoming increasingly apparent as the money supply expands. In May, the money supply surpassed $23 trillion, with a month-over-month jump of over 1%, the highest since 2021. Bitcoin's fixed supply of 21 million BTC makes it a valuable neutral asset, offering a solution to the rapid expansion of the money supply. While attention has shifted to the Iran conflict and AI, BTC is poised to regain its spotlight as a dynamic asset.
Understanding market signals is crucial for investors. One such signal is the BTC ETFs, which experienced significant outflows in the first half of the year. However, recent developments, such as the SpaceX IPO and MSTR concerns, have likely contributed to this outflow. As these factors subside, sustained ETF inflows will indicate a stabilization of market confidence. Additionally, the improvement in BTC's Coinbase premium signals a potential return of investor appetite.
There are also signs of seller exhaustion and believer accumulation. Data from Checkonchain reveals that around 45% of long-term holder supply is at a loss, a level associated with prior market bottoms. This suggests that many sellers have already exited, leaving only those with conviction, who can withstand volatility and may even be adding to their positions. This is evident in the climbing BTC supply held by long-term holders and the abating on-chain movements of longer-held BTC.
The situation today presents an opportunity for BTC to turn the tide. With growth in the money supply accelerating, sentiment and momentum could soon shift. The market is currently battling a set of headwinds unrelated to BTC's fundamental attributes, and the question remains: what happens when these headwinds transform into tailwinds?
Headlines of the week
- Strategy (MSTR) has become an active capital manager, authorizing $1.25 billion in bitcoin sales and lifting the STRC dividend to 12%.
- Stripe, Coinbase, and BlackRock have backed a new Open USD stablecoin network, challenging the economics of Circle and Tether.
- The UK's new crypto rules promise global trading but face significant compliance hurdles.
- New York Life has made its tokenization debut with a tokenized high-yield bond fund.
- Trump's crypto earnings have sparked renewed conflict-of-interest criticism.
