VanEck June 2024 Bitcoin ChainCheck

Please note that VanEck has exposure to bitcoin.

Our June 2024 ChainCheck goes deeper into the dynamics within the Bitcoin ecosystem during this market’s summer doldrums. Amid Bitcoin's low volatility and broader crypto market pullbacks, this month’s data highlights a pickup in Bitcoin miners’ coin sales due to low profitability, with many miners pivoting some of their power capacity to AI. As the market has re-considered the value of those power contracts, Bitcoin miners’ total market cap reached an all-time high in June.

• Bitcoin’s Price Action
• Bitcoin’s Network Activity, Adoption, and Fees
• Bitcoin Market Health and Profitability
• Bitcoin Miners
• Bitcoin ChainCheck Monthly Dashboard

Some takeaways for June 2024:

Bitcoin’s Price Action

• Market sentiment: Bitcoin’s 30-day moving average (30 DMA) price gained 4% over the last 30 days (May 26th - June 24th), currently standing at $67,288. This represents the 99th percentile of all-time 30 DMA price history. Bitcoin’s 30 DMA YoY performance climbed to 146% after prices continued consolidating under all-time highs, conserving most of the market’s Q1’24 gains. An average of 94% of Bitcoin addresses were in profit this month, up 2% MoM.
• Regional trading: Post-halving adjustments have brought distinct changes in regional market behaviors:
• Asia hours: BTC’s 30 DMA price increased by 1% this month, contrasting with last month’s (-4%) decrease, suggesting new optimism among traders in the region.
• U.S. hours: Price averages increased by 2% this month, sustaining this market’s bullishness after last month’s 4% growth, but at a slowed pace in the face of altcoin market headwinds.
• EU hours: Price averages increased by 2% this month, up from a (-2%) decrease last month, cautiously mirroring Asia’s increased optimism.

Source: Glassnode, as of 6/24/24. Past performance is no guarantee of future results.

• Funding rates: The average annualized funding cost for bitcoin futures saw a 25% MoM increase to 12%, bouncing back from May’s capitulation. We think many hedge funds are playing this cash-and-carry (long spot, short futures) trade. We read the elevated funding rates as positive for risk appetite in the space and indicative of similar dollar funding shortages as plagued last cycle.

Bitcoin’s Network Activity, Adoption, and Fees

• Daily transactions: Last month’s significant 20% increase in 30 DMA transaction counts continued at 7% MoM growth this month, breaking into the 99th percentile of historical activity with ~603k daily transactions.
• Ordinal inscriptions: Daily inscriptions have shrunk (-51%) MoM to an average of 4,525/day, compounding the abrupt (-79%) market shift away from Ordinals observed in May. Average daily inscriptions are down (-97%) YoY, starkly contrasting last year’s frenzied experimentation with the new Bitcoin tech. Importantly, however, the market capitalizations of leading Ordinals collections have not experienced declines quite as dramatically. We read this significant retraction in Ordinals ecosystem activity as an important process for the market to process excess noise.
• Total transfer volume: Total transfer volumes’ 30 DMA increased by 5% MoM to $45.29 billion, maintaining the network’s high-value transfer activity despite low price volatility. Yet these numbers are still dwarfed by the last cycle’s highs, wherein the metric sustained twelve-figure levels from Q3’21 – Q2’22. With this month’s print representing only the 86th percentile in all-time history, Bitcoin’s current transfer volumes suggest the market has room to run.
• Average transaction fees: The $7.62 30 DMA transaction fee represented 88% growth in dollar terms MoM, rebounding from last month’s (-78%) decline despite persistent blockspace decongestion from lowered Ordinals activity. The healthy rebound in fees was disproportionately driven by pronounced activity on June 7th and 8th during Bitcoin’s most recent local top. As Bitcoin’s security budget comprises transaction fees and inflation (which recently halved in April), the recent lack of sticky fee revenue from Ordinals underscores the importance of continued development in the inscription and Bitcoin Layer-2 spaces.

Bitcoin Market Health and Profitability

• Percent of addresses in profit: A modest 1% uptick to a 30 DMA of 94% addresses in profit reflected prices stabilizing under March’s new all-time highs. Notably, this appears to be the longest period that Bitcoin’s price has traded below the multi-year all-time high after initially breaking through it. However, this summer’s lull may be partially explained as this market cycle “cooling off” after making new all-time highs before the halving, unlike the 2013-2017 & 2017-2021 cycles. Such behavior could reflect traders’ expectations for this cycle to repeat the four-year cadence suggested by previous cycles. If the current cycle’s durability adheres to previous trends, this could indicate a potential market top between Q2-Q4 2025.
• Net unrealized profit/loss: This ratio’s 30 DMA remained unchanged at 0.55, suggesting a cautious but not pessimistic sentiment.

Bitcoin Miners

• Total daily BTC miner revenues: Daily mining revenue averaged $33.30 million last month, representing a 7% MoM gain, offering a slight reprieve after last month’s (-49%) MoM decline. Bitcoin mining economics dictate thinner margins post-halving, as the cost of mining each Bitcoin effectively doubles overnight. Without a rebound in Ordinals activity to subsidize fees or more significant BTC price appreciation, more miners may soon be forced offline. That said, Bitcoin Miners equities’ outperformed in May as several explored re-allocating existing power to AI use-cases. The total Bitcoin miner market cap reached an all-time high in June.
• Transfer volume from Miners to Exchanges (USD): Miners sent an average of $3.29M in BTC per day to exchanges over the last month, up 45% MoM, indicating the setting of a potential bottom in this metric. Such a post-halving miner capitulation is a typical post-halving phenomenon and is associated with downward price pressure. Notably, however, as the market adjusts to the reduced supply of new BTC, such phases are usually followed by periods of recovery and significant price appreciation, with surviving miners benefiting from price increases. We view miners’ recent transfers to exchanges as being analogous to their Q3’20 flows, while today’s prices remain relatively “ahead of schedule,” hovering at previous all-time highs more similarly to Q4’20. Accordingly, we interpret increased exchange flows as a bullish indicator.

Chart of the Month:

Bitcoin Transfer Volume from Miners to Exchanges vs. Bitcoin Price

Source: Glassnode, VanEck research as of 6/24/24. Past performance is no guarantee of future results.

Source: Glassnode, VanEck research as of 6/24/24. Past performance is no guarantee of future results.

Notes:

Net unrealized profit/loss ratio (NUPL) can be calculated by subtracting the realized market cap from the market cap and dividing the result by the market cap. When a high percentage of Bitcoin’s market cap consists of unrealized profits, it can be interpreted that investors are greedy. Background reading here.

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