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Crypto Stocks Gain as Bitcoin Breaches $28,000

Bitcoin logo with stock chart gain in the background.

Bitcoin returns to the mid-August level. Which crypto-related asset benefited the most?

From Sunday to Monday, Bitcoin (BTC) reached $28.5k, a level last seen on August 17th. The one-day 5.5% price surge affected the altcoin market as well. DeFi networks, from Ethereum (ETH) and Cardano (ADA) to Avalanche (AVAX), rose within the 3 – 7% range, with ADA at the higher end while ETH at the lower.

Interestingly, Ethereum competitor Solana (SOL) is the clear weekend winner, as SOL price started to surge on Saturday, increasing by 23%, from $20.26 to $24.61. This has played out many times before.

Bitcoin Controls Both Altcoins and Crypto Stocks

Bitcoin has the largest market capitalization of any coin, serving as a Jupiter to its crypto moons. Moreover, altcoins are traded against BTC, so a rise in Bitcoin translates to lower altcoin prices in BTC terms but higher in fiat terms.

Likewise, crypto stock shareholders respond directly to Bitcoin, as it sets the mood for the overall crypto market sentiment. The largest stocks deriving from Bitcoin exposure account for $26.7 billion worth of capital. These are Coinbase (NASDAQ:COIN), MicroStrategy (MSTR), Hut 8 Mining Corp (NASDAQ:HUT) , Marathon Digital Holdings Inc (NASDAQ:MARA), and Riot Platforms (NASDAQ:RIOT).

Of the five, only RIOT shares surged ahead of BTC price over the weekend, at a 7.13% increase. Yet, this is still half ($10.11) the RIOT share price from this year’s ATH in July, having reached $20.18 per share. The question is, what brought the Bitcoin price surge, and is it sustainable?

BTC Whale Accumulation: Market Making Setup?

Riding on the bullish news of inevitable Bitcoin ETF approvals, Bitcoin whales have accumulated BTC since September. Santiment data shows that Bitcoin wallets holding 10 – 10,000 BTC has bought $1.17 billion worth of Bitcoin since September 1st.

As of September 24th, one of the top whales got even larger. Michael Saylor’s MicroStrategy holds 158,245 BTC at an average purchase price of $29,582 per coin. Although the weekend Bitcoin surge reflected well for MicroStrategy (MSTR) shareholders, the stock has since leveled out at 3% growth.

Nonetheless, year-to-date, MSTR shareholders have gained more from Bitcoin exposure than actual BTC holders, at 133% vs 70%, respectively. Moving forward, of the three BTC holding cohorts, 1,000 – 10,000 BTC wallets have the most power to move the market in either direction.

The middle yellow cohort known as “sharks” (100 – 1,000 BTC) is lagging behind the smallest whales in Bitcoin accumulation. Image courtesy of Santiment.
The middle yellow cohort known as “sharks” (100 – 1,000 BTC) is lagging behind the smallest whales in BTC accumulation. Image courtesy of Santiment.

As has been the case before, this would place whales in the market-making role. All three whale cohorts could partake in profits, bringing the BTC price down again if not countered with sufficient buy pressure.

Ahead of Bitcoin ETF approvals and Bitcoin halving in April 2024, Bitcoin market makers could be setting a situation wherein short-term holders are cashing out. In turn, whales would be better positioned to dump, setting the stage for the next bull run.

Perceived as a milestone legitimization threshold, Bitcoin ETFs are also perceived as capital floodgates. So far, the Securities and Exchange Commission (SEC) has postponed all of them. The following (dis)approval round is between October 16 – 19, with mid-March 2024 as the final deadline.

This is just ahead of Bitcoin’s fourth halving when the BTC mining reward is cut from 6.25 BTC to 3.125 BTC. In the meantime, Bitcoin mining companies are an additional factor to account for.

USG Shutdown: Temporary Reprieve for Bitcoin Miners?

Bitcoin miners sold during price peaks in previous bull runs to fund their operations. This is a recurring cycle of accumulation and capitulation. The trick is to accrue capital through the most efficient mining means but without going too much into debt before the capitulation phase.

Core Scientific (CORZ) learned this lesson the hard way when it declared bankruptcy in December 2022, just after the FTX exchange crash ushered the crypto winter.

From May to the end of September, the BTC exchange’s net position has been in the red zone. This means there has been more outflow than net inflow from all exchanges, indicating more sellers than buyers. The exception was in mid-August when Bitcoin reached the current price level of $28.5k.

Bitcoin Exchange Net Position Change - All exchanges
Image courtesy of Glassnode

As with the previous rise, the present flipping into the green zone may indicate another BTC dip ahead. The weekend surge is likely a result of another USG shutdown being averted, lifting anxiety off the market. Late Saturday, the House of Representatives voted 335-91 to temporarily fund the government.
With the USG shutdown fear gone, so have the prices leveled. In addition to depleted excess savings for the bottom 80% of households, this makes an environment less likely to turn into a sustainable bull run. Historically, October has been the second most performant month for BTC price, in the shadow of November.

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