Key takeaways:
Dormant Bitcoin holders moving large sums to exchanges raises concerns about long-term confidence amid growing concerns about the potential impact of quantum computing.
Strong inflows into Bitcoin ETFs failed to lift sentiment, with traders instead rotating toward fast-rising privacy coins, such as ZEC and DCR.
Bitcoin (BTC) has repeatedly struggled to maintain prices above $106,000 since early November, despite the S&P 500 sitting 1% below a new all-time high. Meanwhile, gold, the traditional store of value, has pared its recent losses and now trades just 4% below its prior record of $4,380.
Many traders say that factors unique to the cryptocurrency industry may be affecting Bitcoin’s performance, but are these serious enough to keep BTC from reaching $112,000 again?
The recent strengthening of the US Dollar Index (DXY) against a basket of major currencies reflects renewed confidence in the US Treasury’s ability to manage its fiscal challenges. When investors fear stagnating growth amid persistent inflation — a scenario often described as stagflation — the domestic currency typically weakens, as monetary expansion becomes unavoidable.
For that reason, traders often highlight the long-standing inverse correlation between the DXY and Bitcoin’s price. By contrast, the US stock market tends to benefit from a stronger dollar and lower interest rates. Reduced borrowing costs lift corporate valuations, while favorable exchange rates make imported goods more affordable when priced in the local currency.
Companies pursuing Bitcoin reserve strategies, such as Strategy (MSTR) and Metaplanet (MTPLF), have previously been among the largest corporate buyers, especially when their shares traded at a premium to their underlying assets. The mNAV multiple captures this relationship, representing the value of the Bitcoin held relative to the company’s enterprise valuation.
Bitcoin price downturn erases share issuance incentive for companies
The recent downturn in the cryptocurrency market has largely erased this advantage, removing the incentive for companies to issue additional shares. At current price levels, any new issuance would dilute existing shareholders, making it an unattractive option without a meaningful mNAV premium.
These companies can still raise funds through debt or convertible notes, but such financing is typically less beneficial for investors. Debt holders often demand collateral, which effectively reduces the amount of Bitcoin factored into a company’s enterprise value; thereby limiting potential mNAV growth.
Investor anxiety deepened after long-term Bitcoin holders, including those from 2018 or earlier, began selling amid a 20% pullback from the all-time high of $126,220. One prominent case is believed to involve Owen Gunden, an arbitrage trader from the era of the failed Japanese Mt. Gox exchange, who reportedly holds more than $1 billion worth of Bitcoin.
In the past week alone, Owen transferred more than 1,800 BTC to the Kraken exchange, valued at over $200 million. While it’s not unusual for long-dormant addresses to move funds, traders are questioning whether these transactions reflect waning long-term confidence, particularly amid growing concerns about quantum resistance and the sharp rallies in privacy-focused cryptocurrencies.
Zcash (ZEC) has surged 99% over the past 30 days, followed by a 74% gain in Decred (DCR), a 37% rise in Dash (DASH) and a 22% increase in Monero (XMR). Despite $524 million in net inflows into Bitcoin spot exchange-traded funds (ETFs) on Tuesday, buyer sentiment remains muted, leaving the odds of BTC reaching $112,000 in the near term relatively low.
The selling by long-term Bitcoin holders, persistent US dollar strength and growing interest in privacy-focused tokens are collectively restraining Bitcoin’s recovery, keeping prices under $106,000 and signaling that meaningful upside may remain limited.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.