Why Lattes Always Lose to Bitcoin?


Quick take;

  • Healthy spot market demand drove the Bitcoin rise beyond 2019 highs with greater derivatives activity being observed at current levels
  • Odds of Bitcoin reclaiming record highs have drastically increased after the asset retraced the entire downtrend which started in 2019
  • The amount of 1+ year bitcoin holders has slightly dipped which is likely due to increased wallet activity in response to the recent price movements.
  • The market for Bitcoin on exchanges has tightened with over 58,000 bitcoin flowing out of exchanges in just three days

The only problem with buying Bitcoin is that you can never own enough. Buying into the ideology and success of Bitcoin means that every financial decision is held up against the long-term opportunity cost of not pumping that money into satoshis.

If only I had bought less Cafe Lattes in college in 2016. If those endless overprice coffees flowed into Bitcoin, it may have bought an actual Starbucks shop. If only I didn’t sell some Bitcoin to buy a rare “red cheeks Pikachu” Pokemon. Wasn’t I foolish to think that any punt could ever outperform a financial revolution underpinned by racks of humming machines distributed in data centers worldwide?

The FOMO is becoming real for both Bitcoiners and nocoiners as Bitcoin skyrockets past 2019 highs. The prospects for all-time highs being formed seem likely as the price rise piques interest from institutions and retail investors alike.

Record Highs for Bitcoin?

From a technical perspective, the surge past 2019 highs raises the odds that all-time highs can be reclaimed. The 2019 high was the start of a Bitcoin downtrend which capitulated in the March 2020 sell-off.

Bitcoin with fibonacci retracement levels
(Source: Tradingview.com)‌‌

The Bitcoin monthly chart is showing a textbook uptrend with higher highs and higher lows forming since the March capitulation. This forms a bullish foundation for price action and increases the likelihood that price can continue onwards to test record highs.

Bitcoin long-term uptrend
(Source: Tradingview.com)

The October bitcoin price increase to 2019 highs was dominantly driven by healthy spot market demand. This can be observed from the BitMEX perpetual derivatives contract trading at a discount to the spot market for most of October.

Bitcoin price performance with derviatives trading at a premium to the spot market.
(Source: Tradingview.com)

The surge past 2019 highs has resulted in the BitMEX perpetual contract spiking to a huge premium over the spot market. This suggests that speculators in the derivatives market will play a larger role as bitcoin price trades between 2019 highs and all-time highs formed in 2017. We will likely observe much more volatile price action as derivatives speculators employ leveraged positions.

Bitcoin Onchain Developments

We are observing a small dip in the percentage of Bitcoin holders that have unmoved BTC for one year or longer. This is natural when prices rise as there is a greater incentive for longer-term holders to move their funds to an exchange and sell.

Read more: Four Bitcoin On-Chain Indicators Worth Watching

Bitcoin HODL Waves
(Source: Glassnode Studio)

However, the dip is slight and is likely attributable to increased wallet activity in response to the recent price rises. If the dip in 1+ year bitcoin holders starts to become more pronounced, it may be a leading indicator of more selling pressure coming to the market and capital flowing out of Bitcoin.

The dip being unrelated to sell pressure is corroborated by the reduction in Bitcoin being held on exchanges. A net of roughly 58,000 bitcoin flowed out of exchanges from November 2nd to November 4th.

Net flow of Bitcoin to and from cryptocurrency exchanges
(Source: Glassnode Studio)

Several narratives can be tied to this flow. Bitcoin holders may be moving funds to cold wallets to hold for the long-term after the recent price increases. There also may be increased levels of distrust with exchanges as regulatory authorities have taken action against exchanges like BitMEX and OKEx.

In terms of bitcoin price outlook, the net outflow makes bitcoin more susceptible to upward price adjustments. The net outflow means that there is a tighter market for bitcoin which will force prices to adjust upwards to facilitate in the case that the market is insufficient for the demand-side.

The demand-side for Bitcoin is looking as healthy as it ever has. Our anticipation that the MicroStrategy purchase may pave the way for more corporate firms seems to have been accurate as we have observed more entries from institutional players.

A recently listed UK firm – Mode Global Holdings PLC – announced that it intends to invest up to 10% of its $11.65 million cash reserves into bitcoin. Also, an asset manager with $10 billion under management – Stone Ridge Asset Management – publicly revealed ownership of 10,000 bitcoin.


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