Summary
- Bitcoin (BTC) demand is cooling as supply-versus-demand indicators—notably the sharp drop in AER—signal that upside momentum may be limited.
- For a meaningful Bitcoin advance, gains may remain capped unless strong capital inflows like those seen in the past re-emerge.
- A tighter financial environment, including rising U.S. 10-year TIPS real yields, could weigh broadly on risk assets, including Bitcoin.
Forecast Trend Report by Period
Bitcoin (BTC) has been staging a weekly rebound, but analysts warn that weakening flows coupled with rising real yields could limit upside momentum.
According to crypto-focused media outlet CoinDesk on the 31st, Bitcoin demand is showing a clear slowdown on supply-versus-demand indicators. The "absorption-to-issuance ratio (AER)," a proxy for institutional demand, plunged from 5.3x in late February to around 1.3x recently.
The metric measures how much of newly mined Bitcoin supply the market absorbs. Based on a block reward of 3.125 BTC, roughly 450 BTC is newly issued per day.
The market view is that even if a short-term rebound continues, additional capital inflows are needed for the move to develop into a sustained uptrend. In particular, unless the strong inflows seen from late last year through the first half of this year are repeated, gains may remain limited.
Global crypto exchange Bitfinex said in a report that "the current AER level of around 1.3x is a zone where demand barely exceeds supply," adding that "sustained and strong capital inflows are needed for a meaningful advance."
The macro backdrop is also weighing on the asset. Markets note that rising real yields are working against Bitcoin, a non-yielding asset.
The real yield on U.S. 10-year Treasury Inflation-Protected Securities (TIPS) has risen by more than 30 bp since Feb. 28 to around 2.02% recently, and climbed as high as 2.12% last week, the highest level since June last year. Real yields are the inflation-adjusted return on bonds, and when they rise, funds tend to rotate out of risk assets and non-interest-bearing assets.
Markets are also watching the possibility that these tighter financial conditions could persist for some time. If the rise in real yields proves structural rather than temporary, it could weigh broadly on risk assets, including Bitcoin.
Michael J. Kramer, CEO of Mott Capital Management, said, "The fact that the 10-year real yield is rising faster than the 5-year suggests the market is pricing in higher real rates over the long term." He added, "Rising oil prices are tightening financial conditions and weighing on risk assets, and that dynamic is likely to persist as long as oil prices keep rising."
Minseung Kang
minriver@bloomingbit.ioBlockchain journalist | Writer of Trade Now & Altcoin Now, must-read content for investors.
