Depleting speculating supply is “insanely Bullish, of course” as institutions remove the coins from weak hands for “strong” HODLing.
Bitcoin continues to experience volatility around $58k, moving in tandem with the traditional markets as Federal Reserve Chairman Jerome Powell vowed to keep the interest rates down and supply the economy with all the help that it needs and “as long as it takes.”
And while the Fed forecasts that inflation (the consumer price index) is likely to ramp up to an alarmingly high rate of 2.4% by the end of the year but says it will be temporary, “common sense and the bond market says they are bluffing, and everybody knows it,” wrote analyst Mati Greenspan.
While Powell, along with his counterparts at the European Central Bank, Bank of England, and The People’s Bank of China, continues to double down and “support the economy” by debasing the currency, the Bank of Japan is stepping away from the aggressive monetary stimulus in favor of a more “sustainable” policy, allowing more fluctuation in 10-year bond yields.
“It is important to strike an appropriate balance between maintaining market functioning and controlling interest rates by allowing interest rates to fluctuate to a certain degree,” said the BoJ in its policy statement.
The central bank kept overnight interest rates on hold at -0.1% and will continue to peg 10-year bond yields at “around zero” but allows them to fluctuate by plus or minus 0.25% instead of the previous 0.2%.
Insanely bullish, of course!
Fed’s dovish statement helped the market climb higher but only to end up lower on Thursday. Before the weekend, S&P 500 and tech-heavy Nasdaq are attempting to rebound as yields calm down. Bitcoin went past $59k before coming back to $58k only to go back up.
Crashing bonds have been acting as a major driver bringing the tech stocks down, which in turn pushes S&P 500, other indices along with Bitcoin down.
“Markets went crazy since FOMC. Bonds and tech seem to have put in a local bottom (nothing extraordinary)—Powell to speak three times next week. And stimulus checks coming,” noted trader and economist Alex Kruger, who expects a repeat of last weekend that saw BTC making a new ATH.
For a fuller picture overlay
– Bonds (TLT)
– Nasdaq (QQQ)
– Small Caps (IWM)
– the S&P (SPY), and
– the Dow (DIA). pic.twitter.com/TkjzNHLYCd
— Alex Krüger (@krugermacro) March 19, 2021
As we have seen on-chain, speculative inventory, Bitcoin reserves on exchanges have been depleting ever since early last year.
“From March 2020, Bitcoin undergoes steep and continued supply shock in sync to USD money printing,” noted analyst Willy Woo.
We have been seeing US money printing climbing up while BTC supply held by speculative “weak hands” reducing and being transferred to institutions and high net worth individuals who are locking up their coins as strong HODLers in response to monetary inflation.
“This is insanely bullish of course. Strong hands have been buying every dip, which has been driving price steeply upwards since Q4 2020,” Woo added.
Institutions, the asset allocator type like pension funds, come in a strong HODLer category because they only sell when their investment thesis changes.
“The arrival of institutional asset allocators to crypto dramatically increases the number of hodlers & strong hands, and should thus reduce the size of price corrections,” trader Kruger.