Crypto

Bitcoin's 15% Drop Overblown, NYDIG Points to Miner Holdings Increase

Bitcoin drops 15% in a month, but NYDIG suggests sell pressure from miners and Mt. Gox may be overstated.

By Athena Xu

7/10, 16:17 EDT
Bitcoin / U.S. dollar
Bitcoin / US Dollar
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Key Takeaway

  • Bitcoin's 15% price drop is attributed to miner sell pressure, Mt. Gox refunds, and German state sales, but NYDIG suggests these fears are overblown.
  • NYDIG data shows publicly listed mining companies increased their BTC holdings in June, contradicting reports of mass miner capitulation.
  • Analyst Greg Cipolaro advises caution with blockchain data interpretations; moved bitcoins may not necessarily indicate sales.

Bitcoin's Recent Decline

Bitcoin (BTC) has experienced a significant decline, plunging 15% over the past month. This drop has been attributed to several factors, including selling pressure from bitcoin mining operators, Mt. Gox refunds, and the German state of Saxony. However, Greg Cipolaro, head of research at NYDIG, suggests that these factors may not fully explain the extent of the price decline. "While emotions and psychology may rule over the short-term, our analysis suggests that the price impact from potential selling may be overblown," Cipolaro wrote in a Wednesday note. He added, "We aren’t oblivious to the fact that other factors may be at play here, but it is reasonable to think that the rational investor may find this an interesting opportunity created by irrational fears."

Overstated Catalysts

Investors have been particularly concerned about transfers related to Bitcoin addresses linked to the estate of the defunct exchange Mt. Gox, the U.S. government, and the German state of Saxony. These entities hold a combined stash of over $20 billion worth of Bitcoin. Even if all three were to sell their assets simultaneously—approximately 375,000 BTC as of June 9—Cipolaro found that BTC's price decline over the past weeks was deeper than it would have been for stocks based on Bloomberg's transaction cost analysis (TCA). Cipolaro also argued that reports about miners capitulating and selling their BTC stash en masse after this year's halving event have been overstated. NYDIG's data showed that publicly listed mining companies actually increased their Bitcoin holdings in June. While the amount of BTC sold picked up slightly last month, it was still well below levels seen earlier this year and last year. Cipolaro advised against relying solely on blockchain data about miners moving assets without understanding the nature of those transactions. "Identifying that bitcoins move to an exchange or OTC desk, even if done correctly, only tells us that coins moved. That’s it," he argued. "They could’ve been posted as collateral or lent out, not necessarily sold."

Bullish Drivers Remain

Despite the recent turbulence, the broader outlook for Bitcoin remains promising. BTC has dropped over 17% to $57,200 in four weeks, causing a rout in meme coins, digital assets tied to artificial intelligence (AI), and other risky corners of the crypto market. However, once the supply overhangs from Germany and Mt. Gox creditors run dry, the market could stage an impressive recovery. Investors commonly exhibit a greater willingness to deploy money in risky, growth-sensitive assets like Bitcoin during periods of global economic expansion. The G-7, an informal group of advanced economies, is currently experiencing an expansionary phase of the business cycle amid elevated interest rates, according to the Organization for Economic Co-operation and Development's (OECD) composite leading indicator. The indicator, gauging the short-term economic outlook for a group of major nations, has crossed above 100 and is rising, indicating above-trend growth and acceleration, according to TS Lombard.

The U.S. Bureau of Labor Statistics' report on the June consumer price index (CPI), due Thursday, is expected to show that the cost of living rose 3.1% over the year, slowing from May's 3.3% annual increase. The expected slowdown would imply continued progress toward the Fed's 2% target, strengthening the case for the central bank to begin reducing benchmark borrowing costs this year. Renewed rate cuts could further catalyze demand for risk assets, including Bitcoin. Since early this year, weaker-than-expected CPI prints have galvanized inflows into spot Bitcoin ETFs, boosting the cryptocurrency's market value. "We forecast headline CPI rose by 0.1% m/m owing in part to another drop in energy prices. This would result in the y/y rate falling a tenth to 3.2% and the NSA index printing at 314.770. Meanwhile, we expect core CPI increased by 0.2% m/m," economists at BofA said in a July 5 note to clients. "Should the CPI report print in line with our expectations, we would maintain our expectations for the Fed to start its cutting cycle in December," economists added, saying a 0.2% m/m core CPI would lift the odds of an early rate cut.

Street Views

  • Greg Cipolaro, NYDIG (Cautiously Optimistic on Bitcoin):

    "While emotions and psychology may rule over the short-term, our analysis suggests that the price impact from potential selling may be overblown."
    "We aren’t oblivious to the fact that other factors may be at play here, but it is reasonable to think that the rational investor may find this an interesting opportunity created by irrational fears."
    "Identifying that bitcoins move to an exchange or OTC desk, even if done correctly, only tells us that coins moved. That’s it. They could’ve been posted as collateral or lent out, not necessarily sold."