The first dip since the first all-time high of this bull run gave us precious data showing BTC market players’ behavior, and it is quite unexpected.

Bitcoin has experienced its first dip since the new all-time high of $74k, and observing the data that accompanied this dip was quite insightful, and even surprising.

Yes, we know that Bitcoin is cyclical and the price action more or less repeats itself every 4 years. However, every cycle is different, marked by varying market structures, new types of investors, and new kinds of market players’ behavior.

From what we gathered from various on-chain analytics sources, this time retail buyers – i.e. smallholders who own less than 1 BTC – might act smarter than institutional investors, which is at least unexpected. Also, the miners are still holding on to their BTC, probably expecting a much bigger rise in the future.  Other market players conform to the expectations: Microstrategy is buying, and day traders are speculating.

Let’s take a glimpse into the Bitcoin bull run’s 2024 edition, but first, let’s see why BTC price dropped.

Why did Bitcoin price dip?

The current Bitcoin market’s main characteristic is its low liquidity, which we have discussed before. Also, as the price rises, so does the open interest – the volume of derivatives contracts that have not been settled.

 This means that every significant buying or selling is amplified: as the market does not find enough BTC to propose at a given price, it moves to the next available price, and so on… until triggering automatic liquidation of futures and options, potentially ending in cascading liquidations.

A the time of writing, for example, it would take a sudden 2% price change to either side to trigger $1 billion worth of liquidations and a 4% slump to trigger $2 billion of long positions’ liquidations (chart: CoinGlass).

In this situation, simple profit-taking could trigger a 15% dip, supported by the heavy outflows from the Grayscale fund (details below), sticky inflation that did not allow the Fed to cut rates, and other totally mundane reasons.

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Retail holders getting smarter

Good news for all of us: regular Bitcoin holders are getting smarter.

The “diamond hands” narrative and the long-term vision of Bitcoin are progressively replacing the “paper hands” habits: the glassnode’s data shows that entities holding 0.1-1 BTC stop buying when the price rallies and resume stacking sats during the dips.

This is the most basic rule of wealth accumulation, but also the hardest one to follow – because we are all humans, and we are scared when the price falls and greedy when it rises.

However, it looks like Bitcoiners have evolved enough to fight this natural compulsion. Indeed, what a 15% dip can do to those who lived through -80% and/or lost all their savings (several times)? 😅  In any case, this is a remarkable attitude from the retail users – i.e. the average guy next to you, not a professional trader, but the one who knows what they are doing 👏

ETFs inflows slowing down

In contrast, professional investors seem to be less astute for the moment.

Last week, when the dip was up for grabs, the ETFs registered a net outflow of $683 million. Yes, almost all of this BTC was sold by Grayscale’s GBTC – the ETF converted from a closed fund, which has kept its high fees (x6 higher than average) and seen a constant outflow since January. These outflows have increased recently, notably due to the now-bankrupt Genesis selling their GBTC shares.

But even the new ETFs managed by the rockstars of finance, such as BlackRock and Fidelity, failed to buy the dip, registering the lowest inflows since the ETFs’ approval (chart: @hildobby on Dune).

It is important to notice that these funds merely reflect their clients’ demand, so it is not Larry Fink and Co who are missing on the opportunity, but rather their clients. For the same reason, social media users spreading panic about BlackRock buying people’s bitcoin are, IMHO, a tad exaggerating.

Looking at this chart, one could argue that this is a chicken-or-egg type of situation, and it could have been that the ETF-related transactions drove the BTC price down. However, with estimated Bitcoin transaction value now oscillating around $12 billion per day, ETFs’ volume of $3 billion looks important enough to influence BTC price action, but not to dictate it.

Michael Saylor, the 🐐

Unlike the ETFs, companies buying BTC for their treasury are acting in their own name, and some have already become important players on the market.

Microstrategy, a public software company led by Michael Saylor that has been regularly buying Bitcoin for the last four years and does not intend to stop. In a recent press release, it disclosed the acquisition of another 9,000 BTC between March 11 and 18, financed with company’s cash reserves and senior convertible notes. These notes act like bonds, which can be turned into the company’s shares, and Microstrategy has already used this mechanism to buy bitcoin on several occasions, recently raising $600 million more.

The company now holds 214,000 BTC, worth roughly $15 billion.

Are the miners selling?

The miners are the natural BTC sellers, as they need a constant flow of dollars to maintain their activity. However, the amount they sell can vary greatly in different situations.

It is visible that the miners are feeling much better than last summer when they were forced to send around 4,000 BTC to exchanges daily. The selling intensified as BTC price climbed, but we didn’t see any extreme selling frenzy: recently, an average of 1,000 BTC was sent to the exchanges by the miners (chart: CryptoQuant).

This suggests that this – probably the most hardened and experienced – part of Bitcoin holders is intent on keeping their coins until the price goes even higher.

I’m finishing this article just as BTC is coming back to the $69,000 level, which means we can consider the first dip successfully ended. However, this does not mean that there won’t be any more dips in the future – on the contrary, the closer we get to the halving, the choppier the price action could become. Not to mention the traditional post-halving consolidation (i.e. price drop) that we saw in the previous cycles.

Stay safe and enjoy the ride 🙂