Hello readers,

Bitcoin saw its single-day largest ETF inflows on Tuesday. Furthermore, onchain data indicates that investors in the APAC/China region were heavy buyers of BTC this week.

In this week’s report, we provide an onchain data update while sharing our views on the short and long-term outlook for BTC and the crypto markets.

Disclaimer: Views expressed are the author’s personal views and should not be relied upon as investment, legal, tax, business, or any other advice.

Let’s go.

Momentum Indicators & Onchain KPIs

Moving Averages

Key Takeaways:

• After dropping into the “death cross” on 4/7, BTC has now rallied above all of its key moving averages — a move we expected to see.

• How BTC performs from here will give us some key insight into whether we get the extended cycle everyone is hoping for, or a continuation of the longer-term downtrend.

• We expect to see a pullback from these levels at some point. When that happens, we’re looking to see BTC fall to a higher low (above $76k).

• If we see BTC fall to a lower low (below $76k), we’re looking for support above $70k. If this holds, we think the bull run can continue. If we drop below $70k, this would be further confirmation of a left-translation cycle and a continuation of the downtrend.

• If BTC reaches $95k and holds, we think it will make a run for new all-time highs.

To that end, let’s hop into the KPI data to see if we can find any clues to forecast BTC’s next move.

ETF Flows

Key Takeaways:

• We saw $3.8b of net outflows from ETFs in February and March and another $600m of outflows in the first three weeks of April.

• That said, we had a massive reversal of the trend on Tuesday, with over $1.54b of net inflows, a single-day record.

• We’re looking to see if this can sustain as a trend moving forward. Our view is that the BTC markets cannot get back to all-time highs without participation from the US markets, and the ETFs by proxy.

Spot Volumes

Daily trading volumes are averaging $8.7b in April, similar to levels we were at when the bull run started in early ‘23. During the rally on Tuesday of this week, we saw $13b of volume, which is still less than half the volume we typically see on a high volatility day.

Furthermore, average active addresses are down 22% in April when compared to November/December of last year.

With that said, investors should acknowledge the reflexive nature of the BTC and crypto markets broadly. Price tends to move first, with onchain activity coming after. Therefore, onchain activity could change rather abruptly.

Short Term Holders

As we can see above, BTC just kissed the short-term holder cost basis ($92.5k). This is a critical support zone that lines up with Bitcoin’s key moving averages.

Long-term holders create support zones and the foundation for new all-time highs. But short-term holders do the heavy lifting late in cycles.

Therefore, we are closely monitoring the onchain behavior of this cohort as their holdings move back into profit.

Key Takeaways:

• Since early February, we’ve seen an 11.4% decline in BTC held by short-term holders.

• Below, we can see a significant uptick in terms of transfers to exchanges on Tuesday and Wednesday of this week totaling $4.4 billion.

• This is not a great sign as short-term holders are showing some paper hands here.

• This is exactly what we saw in March of ‘22, when the BTC price briefly reclaimed the short-term holder cost basis level (after selling off from the $69k highs). In that instance, it was a signal that the bear market would continue through the rest of the year.

Long Term Holders

Can long-term holders make up the difference?

Below, we can see that long-term holders are back in the market as buyers. They currently control 69% of the supply, up from a low of 66% on 2/1/25.

Some context:

• At the peak of the ‘17 bull run, the % of supply held by long-term holders was 51.6%

• At the bottom of the ‘18 bear market, the % of supply held by long term holders was 67.3%

• At the peak of the ‘21 bull market, the % of supply held by long-term holders was 69% (second peak). At the first peak, it was 58.9%

• At the bottom of the ‘22 bear market, the % of supply held by long-term holders was 69.5%

• At the December ‘24 peak, the % of supply held by long-term holders was 67.3%

Our read: a higher concentration of long-term holders is setting a solid base right now. With that said, we think this data is starting to be skewed by the ETFs, where many retail investors are buying their BTC.

Long-Term Holders to Short-Term Holders: Supply Ratio

It’s clear that short-term holders are passing their coins to long-term holders. Below, we can see that the ratio appears to have bottomed as the price was peaking in December/January.

This is concerning as it typically marks the cycle (or local) tops — as seen in Dec. 17, April ‘21, March of ‘24, and Dec. ‘24.

With that said, we did have a “double top” last cycle that was largely driven by long-term holders. The ratio bottomed at the first peak in March (indicating short-term holders were driving the bus), and topped at the second peak for the cycle in November ‘21 (second top driven by long-term holders).

It’s possible we’re setting up for a similar outcome today. If that’s the case, another extended move is less likely, but you could potentially see another top in the $110-130k range.

Stablecoins & USDT Dominance

BTC price tends to correspond well with the rise of USDT circulating supply (and dominance).

Therefore, it’s notable that USDT supply has been stuck at roughly $140b now since mid-December. Meanwhile, we are seeing a rise in USDC supply (up 47% since mid-December). Again, this is similar to what we saw last cycle, as USDC supply increased well into the bear market before falling off late in Q3-22.

Funding Rates

Funding rates turned deeply negative on Tuesday of this week, as shorts bet that BTC will be rejected at the $94k level. Shorts are now paying the highest amounts since August 2023 to keep their positions open.

This gives us an idea of how traders and speculators are positioned. If they are wrong, we could see a short squeeze with BTC running to $100k+.

Short liquidations were just $23m on Tuesday and $13m on Wednesday this week — a modest figure that suggests the battle between shorts and longs has yet to fully play out.

MVRV-Z Score Analysis

• Bitcoin’s MVRV-Z score is currently 2.2. This analysis uses the z-score to normalize the data across time periods and market regimes. A z-score of 2.2 means that BTC is currently trading 2.2 standard deviations above its mean score. Since 1/1/17, it has spent 70% of the time below this level and 30% of the time above it.

• We analyzed periods in which the MVRV-Z score broke the 2 level on an upswing, and then isolated instances where it was the third + time making this move within 18 months (as we’re seeing now). Below are the returns for these periods:

12-month returns were negative in each instance.

For completeness, we include ALL instances in which the MVRV moved past 2 in an upswing since 1/1/17:

Key Takeaways:

• Avg. 1-month returns: 10.34%, with 53% of instances resulting in positive returns.

• Avg. 3-month returns: 34.25%, with 55% of instances resulting in positive returns.

• Avg. 6-month returns: 59.83%, with 53% of instances resulting in positive returns.

• Avg. 12-month returns: 191% (84% if we remove the 1/7/17 instance), but with only 33% of instances resulting in positive returns.

Generally speaking, buying a break above 2 in the MVRV-Z score can lead to strong returns, but these outcome have historically come at the beginning of cycles (early 2017, late 2020).

Summary: Momentum & Onchain Indicators

• Onchain activity has been trending down over the last three months. We see this not just with BTC but also across Ethereum and Solana.

• Below, we can see that APAC/China was responsible for most of the move this week, though we did see a big move into ETFs on Tuesday (not included in the chart below). This is a positive sign, but we feel strongly that BTC cannot resume its bull market structure without strong participation from the US market.

  

  Data: Velo

• Stablecoin growth is starting to wane, with USDT stuck on $140b of supply for the last four months. In the past, we’ve seen a correlation between slowing growth in USDT stablecoin supply and periods of chop/consolidation for BTC (April - Oct. of ‘24 and Sept. ‘21—Dec. ‘21, which ultimately led to a bear market).

• The ratio of Long-Term Holders to Short-Term Holders is of primary concern to us. As noted, long-term holders tend to set the bottom/foundation for parabolic moves. But it is short-term holders entering the market in force that push the price to new all-time highs. Conditions can change fast, but we have a hard time seeing that play out currently. A longer period of chop/consolidation would create a healthier setup for a wave or new money to come into BTC.

• MVRV-Z score analysis reveals mixed results for near-term returns, with more positive outcomes in the two to three-year outlook. We prefer to buy BTC when it is closer to the 1 level than where it is today.

• We acknowledge that we are looking backward with this analysis. Investors should understand that things can change fast due to the reflexive nature of crypto markets (price tends to move first, driving narratives and onchain activity).

• Finally, please note that our onchain data analysis does not include the ETFs or Bitcoin on centralized exchanges (about 18.7% of the supply).

The Short-Term Setup

BTC Decoupling from Nasdaq?

There has been a lot of talk about a “Bitcoin decoupling” as global capital moves out of US markets. We’re fading this, but not because we don’t think Bitcoin will “decouple.” The reality is that Bitcoin is generally uncorrelated with Nasdaq (.22 mean and .23 median correlation going back to 1/1/17).

With that said, Bitcoin’s correlation to Nasdaq has risen this year (.47) and tends to rise when the Nasdaq comes under pressure (the correlation jumps to .4 on days when Nasdaq drops 2% or more going back to 2017).

We do not see this changing anytime soon. Which begs the question: does the Nasdaq have another leg to fall? We think it does.

Why?

While investors continue to move out of risk assets (see below), the market is still trading at 19x forward earnings.

Here's how this compares to the trough of the past four major corrections:

1. 2022 bear market: 15x. This equates to the S&P at 4,248 today.

2. Covid: 13x. This equates to the S&P at 3,682 today.

3. Great Financial Crisis: 17.1x. This equates to the S&P 500 at 4,815 today.

4. Dot com bubble: 20x. This equates to the S&P 500 at 5,665 today.

Important Context:

1. Analysts revised earnings forecasts down 2.2% during Covid (happened so fast), 4.2% in the '22 bear market, 64% in the GFC, and 38% in the dot com bust

[the significant drop in earnings forecast during the dot com burst and GFC led to higher trough multiples]

2. So far, earnings have been revised down just .3% today. 

Meanwhile:

• Advanced layoffs are now exceeding Great Financial Crisis levels (mostly government layoffs). This is not yet reflected in labor market data.

• Survey soft data is coming in weak across Philly Fed Manufacturing Index, Housing Starts, and Philly Fed New Orders, bookings for container ships, and trade at LA ports.

• The Atlanta Fed is projecting negative growth in Q1.

• The Fed is sitting on its hands (5% chance of a rate cut in May).

• The tariff negotiations are quite complicated, will take more time than the market is anticipating, and could see further spikes in escalation/rhetoric.

In summary, we think the Trump administration is doing its best to stair-step the stock market down (to get the dollar and rates down). With that said, the economy may already be beaten and bruised. As such, we think the next leg down could come when the hard data starts to come in.

On the flipside, it’s possible the market sails through the uncertainty if:

1. Tariff deals move faster than anticipated.

2. The bond market stays at bay, with no serious plumbing issues.

3. The Trump administration successfully turns the market's attention to tax cuts and deregulation, which they are currently working on.

The Long-Term Setup

The longer-term setup looks fantastic for BTC and crypto at large.

Why?

US Fiscal Deficit

The budget deficit in the US is growing, not slowing!

We’ve admittedly flip-flopped on this one multiple times. But with Elon now announcing his departure from the White House in May, it’s become clear that DOGE is mostly political theatre and going after small fish.

In short, nothing stops this train. The Treasury will likely continue to play a significant role in providing liquidity. And it’s not just the US (as we’ve seen the past few years), as Europe is also ramping up its fiscal spending to pay for defense and infrastructure.

We think the Fed will start expanding its balance sheet again in Q3/Q4.

As this starts to play out, we expect to see monetary repression/yield curve control, and higher inflation globally. We expect this will be an environment where investors will favor non-sovereign, hard money alternatives to stocks such as Gold and BTC.

Risk Management & Final Thoughts

Long-time readers know that we like to wait for “fat pitches,” and we’re comfortable sitting in cash until we see them.

It was a “fat pitch” to buy BTC and other assets (such as SOL) at the lows of ‘22. It was a “fat pitch” to double down last September (including an allocation to memes) ahead of rate cuts and an anticipated Trump election win.

We also thought it was a “fat pitch” to weight the portfolio toward cash in December/January.

Is it a “fat pitch” to go long crypto right now?

For us, that’s a no. We see what’s on the horizon. But we also like to keep things really simple. In a lot of ways, we think it boils down to this:

If you believe we are in a structural reset of global trade and monetary systems (as we do), then you can ignore the rhetoric coming from Trump and try to find the signal amongst the noise from people like Bessent.

Our view is that this is going to take a lot of time to play out, and we haven’t even made it through the bottom of the first inning.

The Fed is sitting on its hands, and we’re happy to join them for now. As such, we are comfortable holding our long-term BTC while keeping plenty of powder dry.

We may miss a little upside in the short term, and we’re ok with that. Everyone has to play to their own comfort zones and risk tolerance. Cash is a position. Given the ample opportunities available in crypto, we like to stay patient.

As always, we welcome opposing views and alternative interpretations of the data.

Thanks for reading.

We’ll be back next week with more cutting-edge analysis of the Solana ecosystem.

We continue to develop unique data sets as we take The DeFi Report to the next level, and we’d appreciate your feedback.

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Disclaimer: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This research report is for general educational purposes only, is not individualized, and as such should not be construed as investment advice. The content contained in the report is derived from both publicly available information as well as proprietary data sources. All information presented and sources are believed to be reliable as of the date first published. Any opinions expressed in the report are based on the information cited herein as of the date of the publication. Although The DeFi Report and the author believe the information presented is substantially accurate in all material respects and does not omit to state material facts necessary to make the statements herein not misleading, all information and materials in the report are provided on an “as is” and “as available” basis, without warranty or condition of any kind either expressed or implied.

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