A bullish Bitcoin whales pattern
Also low fees ETFs are winning and taking the long term view on recessions
Welcome to the Friday edition of the Ecoinometrics newsletter.
Every week we bring you the three most important charts on the topics of macroeconomics, Bitcoin and digital assets.
Today we'll cover:
A bullish Bitcoin whales pattern.
Low fees ETFs are winning.
Taking the long term view on recessions.
Each topic comes with a small explanation and one big chart. So let’s dive in.
In case you missed it, here are the other topics we covered this week:
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A bullish Bitcoin whales pattern
Do you remember this interesting on-chain pattern we noticed in the previous bull market?
Every time the whales (here the cohort of addresses controlling 1k to 10k BTC) are accumulating coins (with or without the small fish) Bitcoin’s price is rising significantly. That’s the blend of orange and red points you see on the chart below. It tends to accompany those big price moves.
Well we could have another one of those events playing out in front of our eyes.
Right now the ETFs are siphoning coins towards the whales addresses. And a big chunk of those coins are coming from the addresses of the smaller fish. That’s why we get those orange dots mostly.
Is it a sign we are at the start of a big move?
I don’t know if we can trust the historical on-chain patterns given the new role the ETFs are playing in this dynamic. We looked at this topic last Wednesday. But it sure is some good hopium.
Low fees ETFs are winning
One month after the launch of the Bitcoin ETFs there is one big loser and two big winners. We are talking net flows here. The BlackRock and Fidelity ETFs are taking the lion’s share of the inflows while Grayscale is bleeding funds.
Can this difference in performance be attributed to the ETF fees?
The fees are the fraction of the AUM that the fund manager operating and ETF keeps for themselves. This is how they get paid. And this is a cost on the performance of the fund.
So naturally for the investors the smaller the fee the better it is.
From this perspective it won’t surprise you that the BlackRock (IBIT) and Fidelity (FBTC) are advertising low fees while Grayscale is posting very high fees. That alone doesn’t explain everything though. Some funds have lower fees that BlackRock and Fidelity without attracting more cash.
And Grayscale is also losing funds because a lot of historical holder of the trusts want to cash out.
So low fees alone aren’t making or breaking an ETF. But for sure they help attract customers.
Taking the long term view on recessions
Two major countries, the UK and Japan, have entered a technical recession. Some commentators called this surprising. The people who follow that closely expected something like that to happen at some point this year.
Who knows if the US will enter a surprise recession this year.
The soft landing narrative certainly looks weak right now. Inflation isn’t really under control. The Fed doesn’t have a ton of ammunitions left. And there is more than one bad scenario for the US economy.
But what if there is a recession? Is it really a big deal?
Well yes. In the short term it is bad. People lose their jobs. Living conditions deteriorates. As an investor you have to go through a liquidity crisis.
But typically all that is temporary. Since the 1950s recessions last one year on average and set back the real GDP by something like 2.5%. By comparison periods of expansion last five years and deliver 24% growth for the real GDP.
So if you are willing to be cautious (and maybe even be bold) during a downturn chances are you’ll be rewarded over the long term.
Sometimes it is that simple. You just have to zoom out.
That’s it for today. I hope you enjoyed this. We’ll be back next week with more charts.
Cheers,
Nick
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