In the current Bitcoin price rally, it is a widely known opinion that miner inflows to spot exchanges have led to a drop in the cryptocurrency’s price. However, on observing the drop from $58,000 to $43000 closely, it becomes increasingly clear why inflows from miners may not be entirely bearish. In fact, miners deposited nearly 61,005 Bitcoins, based on data from CryptoQuant,
All miner outflow || Source: CryptoQuant
Now that the cryptocurrency’s price has recovered and the asset is trading above $48,000 again, ideally, miner deposits should have dropped too since this would, in turn, allow the price to hike as well. However, the bounce in price came despite deposits of over 9,500 Bitcoins to spot exchanges in the last 24 hours. While this may be a mere observation, what is clear is that miner deposits are not entirely driving Bitcoin’s price this market cycle.
One of the top factors influencing the current surge in price may be the ETHBTC correlation and institutional demand. Bitcoin’s price is currently below the 100-day moving average. With the ETHBTC correlation back above 70% and increased institutional investment in Ethereum, Bitcoin’s price has recovered by over 5% in less than 24 hours.
Besides institutional investment flow in Ethereum, institutions like MicroStrategy are leading another wave of Bitcoin investments. However, none of these metrics hint at a revival in price, like the one observed in January, before the price hit a new ATH. Ergo, there may be a further decline in price, as has been the usual case in the month of March, historically.
To date, this is the most consistent seasonal pattern in Bitcoin. Why is this the case? Well, it may be tax-related.
Bitcoin monthly returns || Source: Unfolded
Based on Bitcoin’s monthly returns from Unfolded, the cryptocurrency’s price has consistently dropped in March every year. In fact, it has dropped by double digits since 2014, while recovering soon after in a month or two.
Though such drops can be seen in the month of September as well, the March one is considered more significant since the former has seen some instances where the opposite has happened. The example of March 2020 best illustrates this, with the cryptocurrency dropping by over 40% in a matter of hours.
Ergo, based on these observations, retail traders can expect a further pullback in price, before the end of March 2021.
