Is Bitcoin A Buy Or Sell? Ark Invest Shares Market Analysis

In its new monthly report titled “The Bitcoin Monthly: Bitcoin Battles Resistance Around Its On-Chain Mean”, Ark Invest has provided an exhaustive analysis of the current market landscape. The report categorizes its findings into bullish, neutral, and bearish perspectives, providing a holistic view of Bitcoin’s current and potential future stance.

Bullish Arguments For Bitcoin

Grayscale Spot ETF and GBTC’s Discount To NAV: On August 29, a pivotal decision was made by a US Federal Appeals Court. They ruled that the U.S. Securities and Exchange Commission (SEC) must revisit and reconsider its earlier rejection of the Grayscale Bitcoin Trust’s (GBTC) application to transition into a spot ETF. This legal development saw GBTC’s discount to NAV shift from -24% to -18% on the same day, indicating heightened market optimism. By the end of August, GBTC was at a discount-to-NAV of -20.6%.

Bitcoin’s General Cost Basis Recovery: Bitcoin’s realized capitalization, which encompasses both its primary (miners) and secondary (investors) markets, is a measure of the aggregate cost basis of BTC. Between Q4 2022 and Q1 2023, the realized cap drawdown stood at -19%, marking its steepest since 2012. This drawdown serves as a barometer for capital outflows from the network.

Ark’s analysis suggests that the deeper the drawdown, the higher the likelihood of Bitcoin holders exiting the market, potentially setting the stage for a more robust bull market. The realized cap has improved from its all-time high in 2021, moving from a 19% low post the FTX collapse in November 2022 to 15.6%, indicating capital inflows over the past 8 months.

Futures Open Interest Collapse: August 17 witnessed a rapid liquidation of Bitcoin futures by 21.7%, the swiftest since December 2021. Ark Invest interprets this price correction as a “cathartic sentiment correction.”

Bitcoin OI flush | Source: Ark Invest

Neutral Arguments

Bitcoin Price and the 200-Week Moving Average: August was a challenging month for Bitcoin as its price dipped by 5.4%, settling below its 200-week moving average at $27,580. This was the first instance since June 2023. However, Ark Invest posits that Bitcoin should find substantial downside support at its realized price of $20,300.