Bitcoin-Focused FinTech Firm NYDIG on Bitcoin’s Seasonality, Spot ETF Outflows, and Market Cycles

by

As a seasoned researcher with years of experience under my belt, I must admit that I find myself intrigued by Greg Cipolaro’s insights into the Bitcoin market. The historical patterns he highlighted, coupled with the current macroeconomic factors, paint a complex yet fascinating picture.

On September 9, 2024, Greg Cipolaro, head of research at New York Digital Investment Group (NYDIG), provided an update on the current state of the Bitcoin market. As per NYDIG’s report, August was a challenging month for Bitcoin, with returns dropping by 9.8%. Cipolaro pointed out that historically, August has been a difficult period for Bitcoin, averaging a return of just 0.1% and a median loss of -8.5%, prior to 2024. NYDIG indicated that Bitcoin had managed positive returns in August only about 38.5% of the time since 2011.

NYDIG noted that September typically doesn’t have a strong history for Bitcoin, with an average return dropping by 5.9% and a median return of -6%. Cipolaro mentioned this makes the upcoming season a tough one. Nevertheless, NYDIG remains positive about Bitcoin’s potential performance in Q4, especially during October, which has seen favorable historical results for Bitcoin.

Over the summer, NYDIG explored how significant sellers have affected the market dynamics. They pointed out that the outcomes of bankruptcy cases involving large Bitcoin holders like Mt. Gox, Silk Road, and German authorities, as well as government-led sales, played a considerable role in this. As per NYDIG’s analysis, most of these significant sellers have now largely concluded their activities in the market, except for U.S. government holdings.

Regarding exchange-traded funds that directly invest in Bitcoin, NYDIG pointed out that during the third quarter, these funds experienced inflows totaling $2.5 billion. However, over the past seven trading days, there have been withdrawals amounting to $1.0 billion, which could put downward pressure on Bitcoin’s price. These withdrawals appear to be linked to broader sell-offs happening in the equity markets, as suggested by NYDIG.

According to NYDIG’s analysis, macroeconomic elements are significantly influencing the current market situation. Specifically, investors seem to be anticipating a possible interest rate reduction by the Federal Open Market Committee (FOMC) for the first time since March 2020. This anticipated cut is estimated to be 25 basis points, with a probability of 30% for it to be a 50 basis point decrease instead. NYDIG further highlighted that worries over a potential U.S. economic slowdown and possible recession could be the primary drivers behind market fluctuations.

NYDIG observed that Bitcoin’s ongoing trading patterns are consistent with past cycles, even as prices fluctuate recently. They added that the arrival of Bitcoin ETFs during this cycle introduces an unusual aspect, yet questions persist regarding whether Bitcoin will attain new record levels in this particular cycle.

In summary, NYDIG pointed out that traders are adopting a cautious stance, as evidenced by the reversal of funding rates in perpetual swaps becoming negative. Cipolaro underscored this as a sign of diminished appetite for highly-leveraged long trades. Additionally, the put/call ratio on Deribit indicates heightened caution, implying that traders are taking steps to shield themselves from potential downside threats.

Read More

2024-09-10 17:35