Bitcoin Price Continues to Rise, But Who Are New Buyers?

The digital asset industry witnessed a remarkable inflow of $2.45 billion in the week ending Feb. 17, coupled with a surge in Bitcoin's price, leading to a resurgence in industry assets under management to $67.1 billion, akin to levels seen in December 2021. 

Source: mashable.com

A significant portion of this investment occurred in the United States, primarily through Bitcoin's spot exchange-traded funds (ETFs), as detailed in a CoinShares blog post dated Feb. 19. However, some data suggests that the influx into Bitcoin ETFs may not be driven by new participants, which is less optimistic than previously anticipated.

In light of the successful launch of ETFs, it becomes pertinent to assess whether the 21.8% price increase by Feb. 19 meets investors' expectations. Despite this notable progress, Bitcoin's price still lags nearly 25% behind its all-time high of $69,000, and historical instances of entities announcing billion-dollar acquisitions in Bitcoin elicited a much stronger price response. As a result, one might have anticipated a more significant impact from the ETFs' $4.93 billion net inflow since their launch on Jan. 11, as evidenced by data from research.

When There Are No Individual Investors, Bitcoin Continues to Rise

There are several potential reasons for Bitcoin's relatively subdued performance, though it's challenging to ascertain how each market participant values their holdings or the motivations behind selling pressure. However, one fact remains certain: if approximately $5 billion of net inflows entered spot Bitcoin ETFs, a similar amount was likely sold by previous holders. It's important to note that some analysts and investors mistakenly equate daily issuance with available supply for trading, but these metrics are not necessarily aligned.

Currently, the Bitcoin network issues around 900 BTC per day as miners' incentives, equivalent to approximately $328 million per week. In contrast, Bitcoin's daily adjusted volume exceeds $10 billion. Therefore, the coins minted for subsidies don't significantly impact pricing, especially considering that over 93% of the maximum 21 million supply is already in circulation. Consequently, it's unlikely that miners' flow is responsible for Bitcoin's limited upside following the spot ETF launch.

Notably, Tesla's announcement of a $1.5 billion investment in Bitcoin on Feb. 8, 2021, preceded a 48% rally within 14 days. Interestingly, the starting price, $38,870, was only 7.5% below the previous all-time high just 30 days earlier. This indicates that even if the market anticipated the movement, the event itself drove Bitcoin's price significantly higher. It underscores the comparatively lower impact of the spot ETF launch in the U.S. in terms of price movement.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.