Translation: Plain Blockchain

This week, we jump straight into the topic because there is a lot to cover, and much of it is actually uplifting, considering the gloom of the past few months; this marks a turning point. The core question I want to explore is: After Bitcoin has dropped over 50% from its peak, do the performances of institutions, ETF holders, and miners meet expectations?

ETF Data

When you look at the dollar-denominated cumulative fund flows of ETFs, the number has indeed decreased, dropping from about $64 billion to around $55-56 billion. This may sound like a lot until you realize that much of this decline is due to the underlying price of Bitcoin falling, rather than actual capital outflow.

A more realistic way to observe this is to look at the flows denominated in BTC.

Figure 1: Cumulative flows of ETFs in BTC terms.

In Bitcoin terms, cumulative net inflows bottomed out at approximately 768,000 BTC and have recently been about 669,000 BTC, a decline of less than 13%. Think about this: Bitcoin has dropped 50% in price, while only just over 10% of the Bitcoin held by ETFs has flowed out. In contrast, short-term holders frequently traded hundreds of thousands of Bitcoins as the pullback began; the contrast is striking.

I don't want to overinterpret this, as not all ETF buyers are institutional participants (it's estimated that about 30% belong to this category). But the behavior of the broader group of holders speaks volumes: These individuals are not here for short-term trading. Many have a genuine long-term vision for Bitcoin, or at least a clear understanding of its risk attributes.

Looking at the recent daily flows of ETFs, as Bitcoin begins to rebound towards the $70,000 range, we have actually seen strong inflows for several consecutive days. Buyers are back, and they are acting without hesitation.

Figure 2: Daily flows of ETFs using a 28-day average.

Treasury Companies

There have been many rumors in recent weeks about Bitcoin treasury companies, suggesting that due to a significant drop in their stock prices, they would begin to capitulate and liquidate their positions to survive. This has not actually happened.

MicroStrategy continues to accumulate. Marathon Digital is also increasing its holdings. Overall, we have not seen significant outflows or any meaningful forced liquidation events. These companies possess large amounts of Bitcoin, and many had assumed they would become a source of selling pressure once conditions worsened, but the majority have chosen to hold their ground.

Figure 3: Despite a decline in stock prices, most of the leading publicly listed finance companies have retained or increased their BTC holdings.

Signals from Miners

In addition to ETFs and institutional players, miners are one of the often-underestimated signals in this market. Due to operating costs, they are highly sensitive to Bitcoin prices and typically continue to sell to pay expenses. Therefore, when they start holding coins, or when the hash rate begins to recover, it is very noteworthy.

Figure 4: Latest signals from the Bitcoin Hash Ribbon indicator.

The Bitcoin Hash Ribbon indicator (which tracks the relationship between 30-day and 60-day moving averages of hash rates) briefly gave a slight "capitulation" signal during the price drop. This is normal, as some miners temporarily reduce output due to unprofitability. However, what we have seen recently is a rapid recovery in the hash rate, with the short-term average crossing above the long-term average once again. Historically, this golden cross has been one of the most reliable long-term buy signals generated by Bitcoin.

Production Costs

I think there is another particularly compelling dimension right now: the electricity production cost of Bitcoin (the pure electricity cost required to mine one Bitcoin, excluding hardware costs).

Historically, this cost has acted as a bottom for fundamental valuation. Whenever the price of Bitcoin is at or below this level, it represents an excellent accumulation opportunity. We have seen this during the FTX collapse in 2022, and also during the consolidation periods in 2024, where each brief dip below that level was quickly bought up.

Figure 5: BTC price falling below its corresponding electricity production cost.

Recently, Bitcoin fell below its electricity production cost again and almost immediately rebounded back to around $70,000. This does not guarantee that a bottom has been established; the hash rate may fluctuate further, and production costs could decline like during the long bear market in 2022. However, buying an asset at a price below its production cost is about as close as you can get to a "value investment" fundamental definition in this market.

Summary

Many pieces of information are starting to come together to form a complete picture. We mentioned in our last member briefing that retail capitulation has already occurred. Institutional behavior (reflected through ETF and financial company data) has remained astonishingly stable. Miners are regaining confidence, and Bitcoin had previously traded briefly below its production cost.

None of this guarantees certainty, and there remains the possibility of further declines. But when these signals accumulate, the risk-reward ratio for accumulating at this level is showing an attractive appeal not seen in a long time. Institutions clearly believe this as well, since they have been buying while most others in the market have been running in the opposite direction.

Article link: https://www.hellobtc.com/kp/du/03/6248.html

Source: https://bmpro.substack.com/p/bitcoins-biggest-players-arent-capitulating