The stock market has made an extraordinary comeback from its lows earlier in the year despite lingering questions about the economy and rising geopolitical tensions, but bitcoin's gains have been more muted. The flagship cryptocurrency hasn't rallied in a big way since the beginning of the year. Since May 9, it's traded in a tight $10,000 range – with a brief blip above that ceiling to its all-time high of nearly $112,000, which was still just a step above its previous record. And this is despite billions of dollars in ETF inflows in that period. On Wednesday, bitcoin ETFs logged 12 consecutive sessions of inflows and are on pace for their ninth week of inflows in the last 11. Both milestones underscore the strength of institutional demand even amid market uncertainty. The funds have collectively seen about $3.5 billion in inflows this month, while the price of bitcoin itself has risen just 2%, according to Coin Metrics. One reason for that could be that despite interest in bitcoin remaining at elevated levels, early megawhales are holding on to their coins for longer, waiting to offload them in greater amounts to today's biggest bitcoin buyers, ETFs and corporate treasuries, in an "orderly" and "well managed" shift in dynamics, according to 10x Research's Markus Thielen. "There is this change of ownership happening," said Thielen, CEO of the digital assets investment research firm. "We are not seeing a lot of real demand right now because the demand has been almost perfectly offset by the selling from these larger wallets." Data from CryptoQuant shows that wallets holding between 100 and 1,000 bitcoins have been the biggest buyers this year. Julio Moreno, head of research at the firm, said bitcoin ETFs likely fall into that cohort. Meanwhile, whales (wallets holding between 1,000 and 10,000 coins) and megawhales (which CryptoQuant labels as humpbacks and whose wallets hold more than 10,000 coins) have been net sellers this year. Retail investors, wallets holding less than a bitcoin, have also been sellers. The two whale cohorts have been setting the bitcoin price for weeks. As long as buying from the 100-to-1,000-BTC holders outpaces the selling from the bigger whales, bitcoin's muted rally can continue, Thielen explained. If the opposite happens, momentum fades and the rally stalls, he said. Moreno highlighted that historically, whales have been regarded as having 1,000 to 10,000 bitcoin in a wallet. However, since the launch of bitcoin ETFs and the emergence of the bitcoin treasury companies, the number of so-called dolphins, as CryptoQuant labels the 100-1,000-BTC cohort, have grown because those institutions tend to spread their bitcoin holdings across many smaller wallets. For example, BlackRock and Strategy have about 550 and 490 unique wallet addresses, respectively, with an average of 1,290 coins per wallet for BlackRock and 927 for MicroStrategy, according to 10x Research. "In reality, these entities are in fact large holders, having purchased thousands of bitcoin," Moreno said. The biggest bitcoin holders are likely miners based in China. From 2013 to 2021, China accounted for as much as 75% of the global hashrate, or the measure of the computational power being used to secure the Bitcoin network and validate transactions. To date 19.9 million bitcoins have been mined. Chinese mining companies account for approximately 11 million to 15 million coins created in that period. They still retain control of at least 5 million coins, according to 10x Research. "In all the other previous peaks, these dormant wallets were waking up and sending bitcoin onto exchanges for liquidation," he said. "But this time, so far, it seems that these wallets are holding – holding tight and only releasing as many bitcoin as can be scooped up by ETFs and by Strategy." While Strategy, which rebranded this year from MicroStrategy, remains the biggest corporate buyer of bitcoin, its acquisition cadence has slowed from the more aggressive levels seen last year, due in part to its narrowing stock premium and increasing competition in corporate treasury adoption of bitcoin. "If megawhale selling accelerates further, a deeper correction is likely," Thielen said. "Conversely, if selling pressure eases while whale accumulation picks up, the next leg of the rally could begin." "At the moment, the imbalance creates a slight bearish bias, making a breakout unlikely without a clear shift in our tactical flow indicator. Until that signal improves, consolidation is expected to continue."
