Could Bitcoin’s Bear Market Be Over? Insights from Galaxy Digital
Galaxy Digital suggests Bitcoin may have reached its market low, but is new investment missing?
Analysts at Galaxy Digital are weighing in on whether Bitcoin's prolonged bear market may be coming to an end. According to their assessments, Bitcoin’s low point was in June, when it closed at $58,566 on the 30th, marking its lowest price of the year. Galaxy's insights include commentary on macroeconomic factors, suggesting that U.S. debt levels might positively influence Bitcoin in the long run.
Strong Financial Recovery
After navigating a difficult financial quarter, Galaxy Digital recently reported a net income of $323 million for the third quarter, a significant recovery from an $85 million loss in the previous quarter. The firm attributed this turnaround to a 12% increase in crypto trading volumes and a 27% rise in their average loan portfolio, reaching $1.8 billion. Additionally, Galaxy announced a $200 million share buyback initiative, with CEO Mike Novogratz highlighting the substantial appreciation of their investment portfolio.
Assessing Market Signals
Despite the optimism, it's important to approach Galaxy's signals with caution. Being a major player in the crypto market, with operations in trading, lending, and ETFs, Galaxy benefits directly from increased investor activity. Nevertheless, an executive acknowledged during their earnings call that trading volumes in the narrow crypto market remain subdued.
The movements of dormant wallets primarily reflect selling, not purchasing, which raises concerns about new investor activity. Bitcoin could potentially run out of sellers yet continue to fall in value if fresh buying doesn’t materialize. Additionally, it’s worth noting that blockchain data can have limitations, as many transactions occur off-chain within exchange order books, complicating the picture.
New Investment Indicators
The presence of new capital is often crucial for uplifting prices, and one easily readable indicator is the activity in spot Bitcoin ETFs—funds that hold Bitcoin directly. Unfortunately, these funds experienced $253.5 million in net outflows from September 28 to October 26.
Daily flow data showcases a dip in buying confidence. Notably, the ETFs observed varied inflows, with $526.6 million on October 19 and $528.4 million the next day but faced considerable outflows shortly after. They subsequently reported a slight regain, bringing total net assets down from $110.8 billion at the start of October to $102.8 billion due to price declines and investor exits.
Additional indicators affirm this cautious outlook. The Coinbase Premium, which monitors the price disparity between Coinbase and global exchanges, has been consistently negative throughout October. This signals that Bitcoin is cheaper on Coinbase than elsewhere, suggesting a retreat among U.S. buyers. Furthermore, on decentralized exchange Hyperliquid, major traders are holding net short positions, which means they stand to profit if Bitcoin’s price declines.
Is a Bullish Turn Ahead?
While Galaxy Digital attributes June as the low point for Bitcoin, the recent upward movement—showing a 26% increase over the past three months—may suggest a reversal. Bitcoin currently trades above its 200-day moving average, and with fewer older holders selling, analysts are hopeful about a turnaround.
However, the much-needed influx of new capital to drive prices higher has yet to be seen. Cumulative net inflows into Bitcoin ETFs peaked at $58 billion on October 21, amounting to $57.3 billion by the 26th. Should inflows exceed the October 21 levels and the Coinbase Premium turn positive, it could indicate renewed buyer interest. Conversely, if Bitcoin dips below the critical 200-day moving average of $72,990, it might suggest that the bear market remains active.