- CME Open Interest in Bitcoin grew, implying a decline in volatility.
- Miner revenue fell while selling pressure increased.
According to a 31 January tweet by Arcane Research, Bitcoin’s [BTC] rally was slowing down. Despite this, institutional interest in Bitcoin continued to grow.
Ahead of the curve – Jan 31
Bitcoin’s momentum has come to a halt, and we see the first tendencies of increased risk appetite from offshore longs while institutional participation remains high as the FOMC press conference approaches.https://t.co/E6m19OnqrZ
— Arcane Research (@ArcaneResearch) January 31, 2023
Read Bitcoin’s [BTC] Price Prediction 2023-2024
One indicator of high institutional interest in Bitcoin was the growing CME Open Interest in Bitcoin. According to Arcane Research, the proportion of Open Interest in Bitcoin that is not related to exchange-traded funds (ETFs) increased from 53% to 57%.
This surge, along with a strong presence of institutional investors in Bitcoin futures, is a positive sign. The CME played a key role in determining the price of Bitcoin and was a driving force behind significant shifts in the market in October 2020 and April 2021.
Source: arcane research
Along with the growing institutional interest, the implied volatility for BTC decreased. In the past seven days, Bitcoin remained relatively stable, fluctuating around $23,000, causing implied volatility to decrease.
At press time, implied volatility was in the low 50s, even for longer time frames. This was similar to the levels seen in early November, as the options market predicted a slower pace in the market.
Source: arcane research
Miners struggle
Along with institutional interest increasing in the Bitcoin derivatives market, retail investors gained interest in Bitcoin as well. According to Glassnode, the number of addresses holding more than 0.01 coins in their addresses increased over the last month.
At press time, the number of Bitcoin addresses holding more than one coin reached an all-time-high of 4.21 million.
However, even though retail investors showed interest in Bitcoin, miners were not having a great time. Over the last week, the revenue generated by Bitcoin miners reduced materially. Along with that, the rising prices of electricity impacted miners negatively as well.
Hashrate Index’s analysis of how US electricity prices affected the Bitcoin mining industry in 2022. The dual pressure of rising electricity prices and falling bitcoin prices has led to the bankruptcy of some largest companies such as Core Scientific. https://t.co/k3opxZFToL pic.twitter.com/JkL0p3oLSH
— Wu Blockchain (@WuBlockchain) January 31, 2023
This could increase the selling pressure on miners, which could incentivize them to sell their holdings and impact the price of BTC negatively.
Source: Glassnode
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Another indicator of growing selling pressure on holders would be the increasing MVRV ratio, as evidenced by Santiment. This indicated that most of the addresses holding Bitcoin could profit if they sold their positions.
The long/short indicator was negative, which suggested that it would be short-term holders that would profit most from selling their positions. It remains to be seen whether these short-term holders decide to sell their holdings or continue to HODL.
Source: Santiment
