Key Points
- Bitcoin’s supply absorption by spot ETFs has shown a temporary decline, indicating reduced interest.
- Analysts suggest retail investors may be shifting their attention towards meme coins.
The recent drop in Bitcoin’s supply absorption by spot Bitcoin exchange-traded funds (ETFs) suggests a decline in interest in this asset class. This observation was made by pseudonymous CryptoQuant analyst Oinonen_t in a new report.
Understanding Supply Absorption
Supply absorption of Bitcoin by ETFs measures the rate at which newly mined coins are acquired by these funds. This metric is significant as an increase in supply absorption from spot ETFs could lead to a rise in Bitcoin’s price. Conversely, a decrease in demand can indicate a potential decline in Bitcoin’s value.
The analyst noted that Bitcoin’s supply absorption recently turned negative, dropping to a low of -0.38. Oinonen_t said, “Despite the hype around upcoming halving in 21 days, Bitcoin’s spot price hasn’t moved dramatically within the past 30 days. One explanation for the stagnant price action is the negative supply absorption of the ETFs.”
Shift in Retail Investors’ Interest
When spot ETFs cannot absorb the newly mined coins, “The demand for the approximately 900 bitcoins issued daily must come from other sources,” said the analyst. Currently, retail investors, who usually accumulate these coins, have shifted their attention towards meme coins. In recent weeks, the values of some Solana-based meme coins have grown significantly, leading to a major increase in the meme coin market capitalization.
Oinonen_t added, “Although retail investors have shown growing interest towards Bitcoin, their focus might be on the new Solana-based tokens and meme coins.” Despite the negative supply absorption being a temporary setback in the spot ETF market, the analyst remained optimistic about Bitcoin’s future, stating, “The bigger picture still looks promising. In a multi-year scenario, I see Bitcoin trying to reach market capitalization parity with gold, which would mean a 1000 percent upside to the current spot price.”
Since its inception, the volume of Bitcoin spot ETFs has significantly increased. Currently, the daily cumulative volume for this asset category is $182 billion, marking a rise of over 3500%. With an asset under management (AUM) value of $24 billion, the Grayscale Bitcoin Trust (GBTC) holds the largest market share in the Bitcoin spot ETF market.
