In a recent interview for Anthony Pompliano’s podcast, William Clemente III, a prominent on-chain analyst and Co-Founder of Reflexivity Research, discussed the performance of Bitcoin in Q2 2023. The conversation covered various topics, from Bitcoin’s price performance to its network usage and market structure. Here are the key takeaways from their discussion.
Bitcoin’s Price Performance
Bitcoin’s price drawdown from its all-time high was a significant topic of discussion. As Clemente explained, “The price drew down as much as 75% towards the back half of last year, but it’s now down only 55% from its all-time high.” Despite this, Bitcoin has had a massive year, up 85% relative to Gold being up 5% and even over double the performance of the NASDAQ, which has been on a record run this year, up about 40% year-to-date.
Bitcoin’s Market Cap Dominance
Bitcoin’s market cap dominance, which is its market capitalization relative to the market capitalization of all other crypto assets, is now over 51%. This is the highest it’s been since April 2021. Clemente attributes this increase in dominance to two significant events: “The first one is the SVB banking crisis that we saw in March of earlier this year and then the second one is this BlackRock ETF filing and other ETF filings that we’ve seen following the BlackRock run. That’s uniquely benefited Bitcoin relative to the other crypto assets and so I think that’s driven a lot of flows into BTC relative to those other assets.”
Bitcoin’s Network Usage
The big story in Q2 was the explosion in popularity of ordinals and inscriptions. As Clemente put it, “Ordinals passed 10 million inscriptions in early April and reached as high as 14.7 million. They’ve also generated a whopping $56 million in fees for the network, a significant amount for miners.”
Bitcoin’s Market Structure
Bitcoin’s free flow, the amount of Bitcoin not held by long-term holders, is near an all-time low. Clemente explained the implications of this, stating, “This means that the amount of Bitcoin for sale right now is near an all-time low. This supply distribution is expected to improve over time as larger market participants lose market share to smaller ones who continue to accumulate.”
Bitcoin ETFs and CME Futures Open Interest
Clemente also discussed the impact of ETFs and the increase in CME futures open interest on Bitcoin. He stated, “As another piece of evidence that we can look at to see that there’s US-based firms getting involved in BTC recently, we can look at the CME Futures open interest. This looks at the total number of Futures contracts outstanding on the CME. Who usually trades on the CME? It’s not kind of crypto degenerates that are looking to punt on leverage. It’s US-based traditional type firms and we can see a clear jump in CME Futures open interest following the BlackRock ETF. About a billion dollars of open interest was added in that time period.”
Bitcoin’s Realized Cap
Bitcoin’s realized cap, which is the market capitalization of Bitcoin based on the price that coins were last moved, increased by roughly $14 billion in the last quarter. Clemente highlighted the significance of this, saying, “This indicates capital inflows into the Bitcoin network for the first time since early 2021.”
Bitcoin’s Hash Rate
Bitcoin’s hash rate has been hitting all-time highs almost every week, indicating that the Bitcoin network is becoming more secure. Clemente noted, “This is a reflection of individuals already mining purchasing more efficient machines and more miners finding interest in the market.”