Netizen Weekly | Bitcoin Market Update #3
Trump Pump Meets Reality: Post-Election Rally Hits the Air Gap
Hello fellow Netizen,
As we called out in our Bitcoin Deep Dive on Monday, on-chain momentum has been fading since early February, and we identified $94K as a key support level that has now decisively broken. While the Bybit heist certainly damaged exchange liquidity conditions, we're also seeing evidence that the "Trump Pump" rally since November 2024 is backfilling into the supply air gap between $70K-$88K—a zone where relatively few coins changed hands during the meteoric ascent. With prices now 20%+ off all-time highs and market sentiment significantly shaken, it's time to assess whether this is a healthy correction or something more concerning.
TLDR: The "Trump Pump" backfilling into the $70K-$88K range creates an attractive entry point for new long-term Bitcoin positions.
Macro View: Liquidity Tide Rising Despite Market Turbulence
The broader financial backdrop contains several quantifiable positives for Bitcoin. The U.S. Treasury's cash balance (TGA) has declined by approximately $81B weekly, projected to hit zero by early June—injecting significant liquidity into the financial system. Retail sentiment remains historically cautious, with AAII bull-bear spread at just the 16th percentile, indicating substantial sidelined capital. Global financial conditions have eased by 2.4% since October 2024, with central banks shifting focus from inflation fighting to growth support, evidenced by the Fed's projected 3-4 rate cuts in 2025.
Near-term risks remain measurable: Policy uncertainty has surged to the 92nd percentile in the Economic Policy Uncertainty Index, driving a 2% contraction in Q4 business investment. U.S. GDP growth forecasts for Q2 have declined from 2.3% to 1.7% in recent weeks, while PMI data shows manufacturing and services sectors both cooling. The February S&P Global U.S. Services PMI dropped to 51.3 from 52.5, sending a clear slowdown signal for Q2 that could temporarily dampen risk appetite.
TLDR: We expect near-term volatility to subside as central bank rate cuts and Treasury spending inject cash into markets through mid-2025, creating a favorable recovery environment for Bitcoin AFTER current selling pressure exhausts.
On-Chain Pulse: Bybit Hack Amplifies Existing Weakness
Bybit's catastrophic $1.48B hack—one of the largest in crypto history—has profoundly amplified pre-existing market vulnerability. Exchange reserves have seen unprecedented outflows totaling $4.3B across Bitcoin and stablecoins in just five days—approximately 2.4x the typical weekly volume.
This sudden liquidity withdrawal pushed Bitcoin into a low-density "air gap" between $70K-$88K where few on-chain transactions occurred during the post-Election rally. With 403,996 ETH ($1.13B) stolen and a total market impact exceeding $22B in lost value, the hack's psychological damage far exceeded its direct financial impact. The monthly performance of major crypto assets reset to April 2024 levels, with Bitcoin dropping 13.6%, Ethereum 22.9%, and Solana 40%.
TLDR: Bitcoin has very low supply ownership between $70K-$88K, making it difficult to predict where buyers may step in to support the price.
Cost Basis Chart Analysis: Trading in the Support Vacuum
Current Bitcoin Price ($85,972) relative to major cost basis levels:
6.9% below STH Cost Basis ($92,319)
33.7% above True Market Mean Price ($64,304)
98.4% above Realized Price ($43,331)
245.8% above LTH Cost Basis ($24,864)
This week, Bitcoin broke through the Short-Term Holder Cost Basis—a critical psychological threshold that puts new market participants underwater on their investment. The drop into the $70K-$88K "air gap" zone triggered accelerated selling due to minimal historical volume in this price band. Despite this weakness, Bitcoin maintains substantial buffers above fundamental support levels, with long-term holders sitting on ~245% unrealized gains even after the correction. Beyond the $70K level, the next realistic point of support would be the previous local highs of $63K-$67K in 2021, which also coincides with the True Market Mean Price of ~$64K.
TLDR: Bitcoin still has strong structural support at the $63K-$67K range (coinciding with True Market Mean Price) IF prices break below $70K after emotional selling exhausts.
SOPR Analysis: Tale of Two Investor Classes
The Spent Output Profit Ratio (SOPR) metrics reveal a clear market divergence: Short-Term Holder SOPR has plunged to a Z-Score of -0.6 (mild loss realization), while Long-Term Holder SOPR remains positive at +0.3 (minimal profit-taking). Unlike bear market patterns seen in 2022-2023 when both cohorts experienced losses, the current structure more closely resembles the August 2024 correction where only short-term investors were underwater while long-term holders maintained profitability—suggesting this is likely a temporary pullback rather than the start of a sustained downtrend, as coins transfer from weaker to stronger hands.
TLDR: We do not believe we're in a bear market—on-chain indicators suggest this is a much-needed correction, lacking the warning signs we've observed during previous market downturns.
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Thanks for reading this week's note! See you next week – and as always, hit reply if you have any questions, comments, or suggestions!
Take care -Brian
Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice. Always conduct your own research and consult with a qualified financial advisor before making investment decisions.