ARK Invest Storm-Buys Bitcoin Despite 22% Plunge...The Real Danger Zone is 'Here'

▲ Cathie Wood, Bitcoin (BTC), Gold / ChatGPT generated image

Although Bitcoin (BTC) fell by 22% in the first quarter, long-term holders actually significantly increased their holdings. ARK Invest, led by Cathie Wood, stated in its latest quarterly Bitcoin report that while price trends are bearish, the internal market structure is closer to end-stage stress than a collapse.

According to Benzinga on May 7 (local time), ARK Invest assessed that Bitcoin has not yet reached a deep capitulation phase that would mark a definitive global bottom. However, conviction buyers' holdings increased by 69% during the Q1 downturn. These holdings grew from approximately 2.13 million BTC to 3.6 million BTC. ARK Invest explained that buying accelerated near the February lows, indicating that strong-handed investors viewed the correction not as an exit signal but as a buying opportunity.

US spot Bitcoin ETF balances also remained stable. According to the report, US spot Bitcoin ETF balances stayed between approximately 1.26 million BTC and 1.31 million BTC throughout Q1, closing around 1.29 million BTC at the end of March. The fact that ETF holdings did not significantly decline even with Bitcoin's 22% drop was presented as the market's first positive factor.

The negative factor is the condition for confirming a bottom. ARK Invest believes there is insufficient evidence that Bitcoin has entered a true bottoming zone yet. The key lower range was presented as between the realized price and the investor price. In the report, the realized price was estimated at approximately $54,177, and the investor price at approximately $49,759. ARK Invest is watching the $54,000 to $50,000 range as a deeper capitulation zone.

The derivatives market also cooled significantly. Perpetual futures funding rates decreased from 7.1% at the beginning of Q1 to 1.8% at the end of the quarter. This means that a significant portion of leveraged long positions have been closed. The 3-month futures basis also narrowed, indicating weakened speculative demand. However, ARK Invest stated that while futures basis often shifts to backwardation during a true cyclical bottom, this phenomenon has not yet occurred.

The macro environment was presented as the second positive factor. ARK Invest mentioned that US non-farm employment was revised down by 861,000, the largest negative revision since the global financial crisis. This suggests that if the labor market slowdown intensifies, there could be more room for the US Federal Reserve to cut interest rates. ARK Invest also reported that Truflation's real-time core inflation fell to 1.11% year-over-year, the lowest level since before the pandemic. ARK Invest concluded that while Bitcoin is technically in a bearish structure, its fundamentals have not collapsed.

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