Recently, spot Bitcoin ETF regulation has undoubtedly been the dominant narrative in the cryptocurrency market. In the past week, Bitcoin (BTC) has successfully stood at $34,000. As the saying goes, the absence of bad news is good news. The market’s current trading sentiment towards the Bitcoin ETF review is gradually becoming neutral. After all, the final results are not expected until the first quarter of next year.

Intuitively, this rebound is driven by ordinary investors who react strongly to emotions. But in fact, some indicators also show that the role of institutions or whales and long-term holders cannot be ignored.

Data shows that Bitcoin balances on cryptocurrency exchanges fell to about 2 million, the lowest level on record. Although the exchange's Bitcoin balance and Bitcoin price have shown a continuous downward trend since the LUNA Collapse last year, in theory, the lower the indicator, the smaller the selling pressure.

Matt Weller, director of research at Forex.com, analyzed from the supply side that the reduction in Bitcoin balances on exchanges has reduced market supply, Bitcoin faces potential supply shocks, and a small increase in demand can push prices up quickly. He said that spot ETFs may fundamentally change the supply and demand situation of Bitcoin.

Exchange Bitcoin reserve balance, Source: CryptoQuant.

According to Glassnode, as of last week, the holdings of long-term Bitcoin holders (wallet addresses holding Bitcoin for at least 155 days) reached a record high of 14.89 million coins, an increase of 40,000 coins in the past two weeks.

At the same time, it can also be seen that 29.6% of long-term Bitcoin holders are currently at a loss, which is comparable to the historical levels in 2015 and early 2019. Referring to historical trends, Bitcoin will still have momentum to rise in the future.

Long-term Bitcoin Holder Supply, Source: Glassnode.

Reserve Risk visualizes the confidence of long-term holders in the price of Bitcoin. It comprehensively uses indicators such as the number of Bitcoin Days Destroyed and its multiple related indicators and Hold Bank (understood as the opportunity cost in US dollars). The current Bitcoin price is in an attractive risk-reward period (green position), indicating that Bitcoin prices are low and investors have strong confidence in its future rise.

Bitcoin reserve risk, source: LookIntoBitcoin.

Since the middle of last year, the Bitcoin holdings of indirect investment products such as Bitcoin-related ETFs, trusts and funds have fallen sharply. This year, as the price of Bitcoin has recovered, it has also shown an increase or decrease in bands. With the current trading confidence further improving, ETF products have once again attracted the attention of investors, and the positions of institutional products have rapidly increased to the mid-level level this year. As Bitcoin prices break out to higher levels this year, it can be optimistically expected that open interest will continue to rise.

Bitcoin holdings of fund products, Source: CryptoQuant.

The market net value of Bitcoin funds premium entered an upward channel, since the bottom at the end of last year, and investor interest in regulated and indirect products continues to rise. The investment demand in this part is strong and continuous, revealing the purchasing power of this type of investor even in the absence of ETF expectations.

According to a survey conducted by Bitwise and VettaFi at the beginning of the year, financial advisors have a strong preference for ETFs. 68% of the respondents said that ETFs would be their preferred way to invest in cryptocurrencies; if Bitcoin ETFs were launched, they would feel more confident about allocating cryptocurrencies. 

Fund market premium, Source: CryptoQuant.

Bloomberg ETF analyst Eric Balchunas said that the Proshares Bitcoin Strategy ETF (BITO) had a trading volume of $1.7 billion last week, the second largest week since its launch, indicating that there is a certain market demand for type of indirect investment in Bitcoin.

BITO weekly trading volume, Source: X@Eric Balchunas.

Whether Bitcoin can continue to rebound will still have to revolve around the review of spot ETFs. In the long run, expectations of halving and improving macro liquidity may continue to support this narrative. However, the profit-taking behavior of short-term investors may disrupt this trend. As BTC rises, the SOPR (Spent Output Profit Ratio) of short-term investors breaks through the boundary value 1 and rises rapidly, indicating that the selling pressure of this type of investor is strong. If there is no continuous tracking news in the future, the future momentum of Bitcoin price may be limited, and BTC may move sideways or correct.

SOPR for short-term investors, Source: CryptoQuant.