Overview of Bitcoin Q3 performance: down 11.5% month-on-month, with long-term holders accounting for more than 76%
Original author: Reflexivity Research
Original compilation: angelilu, Foresight News
Key points:
BTC’s price performance has been poor this quarter, down 11.5% quarter-on-quarter, but it has still outperformed most asset classes year-to-date.
The impact of U.S. financial institutions, which drove Bitcoin’s rise in the first half of the year, has completely subsided at the time of writing.
Bitcoin trading volume, liquidity, volatility, and search trends all continue to decline.
Grayscale GBTC negative premium has reduced from 48% to 16%.
The proportion of long-term Bitcoin holders has reached a record high, exceeding 76%.
Bitcoin’s intrinsic value estimate indicates that Bitcoin price is at the lower end of the value spectrum.
Bitcoin active addresses grew slightly, while transfer volumes (entity adjusted) continued to decrease.
Following the strong performance of Bitcoin prices in the first half of the year, Bitcoins performance in the third quarter was lackluster, falling 11.5% quarter-on-quarter.
However, in this chart from NYDIG, we can see that since 2023, Bitcoin has a return of 63.3%, which has outperformed large-cap stocks, small- and medium-cap stocks, US and European stocks, commodities, treasury bonds, and gold. , cash, emerging markets and real estate investment trusts, among other asset classes.
In the first half of this year, an important factor driving Bitcoins performance was the submission of Bitcoin spot ETF applications by a number of well-known traditional financial institutions, such as Blackrock and Fidelity. After these applications were filed in mid-June, Bitcoin’s cumulative returns surged during U.S. trading hours, reaching a quarterly peak (around 15%). But as the chart below shows, the premium was completely eliminated within 3 months, with returns essentially approaching 0% by the end of September.
In the third quarter, the open interest balance of CME Bitcoin futures fluctuated greatly but showed an overall downward trend. It reached a peak of nearly US$3 billion at the end of July, a 19-month high since January 2022, but after the fluctuation, it has dropped to Near $2 billion, indicating weakening market confidence in Bitcoin.
Other indicators of the Bitcoin market have also seen declines, with Bitcoin spot and futures trading volume falling from about $200 billion in July to about $100 billion in September.
The annualized basis of Bitcoins three-month futures dropped to about 4% at the end of September after peaking in mid-August. These data indicate that the Bitcoin market is in a downturn.
One positive trend we have observed this year is that Grayscales negative GBTC premium rate is narrowing, from -48% to -16% in 2023, reflecting market interest in Grayscale potentially converting its existing closed-end funds. Views on the spot Bitcoin ETF are increasingly positive.
In terms of Bitcoin valuation, one of the most noteworthy indicators is the MVRV ratio, which refers to the ratio between the market price and the realized price. The realized price is the average price of each Bitcoin last traded on the chain. When MVRV is high, market participants are sitting on large amounts of unrealized profits with the potential to realize some of those profits, and when MVRV is negative, it means the entire market is in the red. While the market is no longer as deeply undervalued as it was late last year, it is still far from the overheated levels reached during the peaks of 2017 and 2021.
Whether Bitcoin’s cyclicality is driven by the halving, macro factors, general behavioral dynamics, or a combination of the three remains a point of debate. But when comparing the performance of the current cycle to the lows of Bitcoin’s previous three cycles, the cycle development is very similar from a time perspective. In the four four-year cycles starting in 2011, Bitcoin has followed a trend of first rising and then falling.
Judging from network activity, the percentage of Bitcoin supply held by long-term Bitcoin holders has reached an all-time high of 76%, which means that at least 3 out of every 4 BTC are held by long-term holders. Long-term Bitcoin holders are defined as on-chain entities that hold Bitcoin for more than 155 days, and on-chain data scientists found that at this threshold, Bitcoin is least likely to be spent. The data reflects the deep belief held by the core group of Bitcoin holders despite volatility and macro uncertainty in the cryptocurrency market, as well as the rise of custody products.
Based on the chart, we can observe the trend of Bitcoin supply over time for both long-term and short-term holders. This change reflects the characteristics of the Bitcoin market cycle, in which long-term investors increase their holdings when the market is down, while short-term investors are more inclined to trade when the market is rising.
The chart shows that the number of on-chain entities holding less than 10 Bitcoins has been on an upward trend throughout Bitcoin’s history, and has grown significantly over the past year in particular. This growth trend also continued in the current quarter, exceeding 17.5%. Regarding the distribution of Bitcoin supply, we expect this positive trend to continue.
In the third quarter, Bitcoin’s block height passed the 800,000 milestone, reflecting that the decentralized network has been operating normally for more than a decade.
Bitcoin’s hash rate also hit an all-time high during the quarter, and with the halving event approaching, increased competition could cause hardship for miners whose energy costs are not competitive.
The number of active Bitcoin addresses increased from 950,000 to just over 1 million in the third quarter.
At the same time, the seven-day moving average of entity-adjusted transfers counted by Glassnode continues to decline, with the Bitcoin network settling only about $3.1 billion per day.
Bitcoin’s public Lightning Network capacity is still down from its peak in July, but has grown in BTC terms and currently stands at 5,200 BTC. It’s worth noting that this is only the public Lightning Network capacity and actual data may vary.
But Lightning Network capacity in U.S. dollars looks less promising, falling to $140 million from a peak of $215 million in late 2021.
