On Tuesday, bitcoin made its way above $28,000 for the first time in a month. While that’s a positive for the bulls, there are other potentially constructive factors at play.
In what could be a constructive catalyst for bitcoin prices and therefore exchange traded funds, such as the Invesco Alerian Galaxy Crypto Economy ETF (SATO), recent data from crypto research firm Glassnode indicate that the reportedly illiquid bitcoin supply is increasing.
Illiquid supply typically resides in wallets that aren’t active traders, meaning that the investors behind the wallets are buying bitcoin with a long-term point of view and are likely buying on dips as well. Should the prediction held by these crypto market participants come true, SATO could benefit because its lineup includes many crypto miners, which intimately correlate with digital currency prices.
“The total held by illiquid entities has jumped to a record high 15,207,843 BTC, with the tally increasing by 215,000 BTC in the past four weeks alone,” reported Omkar Godbole for Coindesk. “The data shows investors remain confident of bitcoin’s price prospects despite continued macroeconomic uncertainty and heightened regulatory risks.”
Gradual Increases Could Propel SATO
Flows into illiquid bitcoin wallets aren’t always significant, but in aggregate, those purchases become large and potentially potent. That is to say, illiquid buyers can stoke modest, steady upside for the largest digital currency.
That could work in favor of SATO because bitcoin miners have long been a volatile asset class. Additionally, the Invesco ETF allocates about 71% of its roster to small-cap stocks — a group with its own reputation for turbulence.
Glassnode analyst James Check opined in a note out on Monday that the bitcoin market appears to be “in a period of quiet accumulation,” which indicates steady demand. That could be the ideal near-term prescription for bitcoin as it looks to fight off sour regulatory headlines and reclaim the psychologically important $30,000 level. In what could prove to be more good news for SATO, the illiquid supply change indicator has been positive for just three weeks, indicating that there could be more upside to come.
“Other things being equal, faster accumulation means weakening supply in the market and potential for price rise. Technical charts suggest scope for bull revival as long as crucial support at $25,200 is held intact, that is the bitcoin price doesn’t drop below that level,” according to CoinDesk.
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VettaFi LLC (“VettaFi”) is the index provider for SATO, for which it receives an index licensing fee. However, SATO is not issued, sponsored, endorsed or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing or trading of SATO.