Welcome to the BTC Lighthouse report.

After an all-time high of $74k, Bitcoin fell by 13% in 5 days to $64,500.

What caused this crash, and has the cycle been reversed?

📈 Bitcoin Performance

🌡️ BTC Lighthouse Temperature

The BTC Lighthouse temperature has retreated to 3.5, almost in the Neutral zone.

❓Why Did The Price Drop

In my previous report, I mentioned that the inflation data was on my radar. And that's what happened.

US Inflation Data

Last week, the US inflation rate came out higher than expected.

This could have been the trigger that paused Bitcoin's rally and started a shake-off of weak hands.

Bitcoin has still been up 50% in the last three months.

Bitcoin ETFs

Net inflows in Bitcoin ETFs were slow towards the end of last week and were -2,300 Bitcoin on Tuesday, the highest negative inflow since the listing of Bitcoin ETFs.

My earlier assumption was that long-term investors were investing in Bitcoin ETFs. This might not be the case.

The type of investors in ETFs cannot be known. There is a reasonable chance that the inflows could be from short-term investors, retail, algos, and high-frequency hedge funds. Long-term investors will come into Bitcoin ETFs, but it will take time and play out over months and years.

If you want to watch a more extended debate on the short-term vs. long-term investors behind Bitcoin ETFs, watch the video below of an interview with Eric Balchunas, an ETF specialist at Bloomberg, and Jim Bianco, a leading macro strategist.

Some key points from the video are:

• Jim suggests that the record-breaking inflow in Bitcoin ETFs suggests that speculators rather than long-term investors dominate the inflows, as long-term investors take more time to act. He warns that if the price drops, it could cascade.
• Eric believes that savvy retail investors who tolerate price drops are behind the inflows and do not expect the cascading impact of a price drop, as Jim suggests.
• Eric mentions that a $10 B inflow has caused a $500 B increase in Bitcoin's market cap because it has a supply shock.

I expect an increase in volatility as Bitcoin tests new all-time highs over the next few months.

Conclusion

The current drop is a shake-out of weak hands, which happens multiple times in a bull run. For new investors, this is an opportunity to buy the dip. I expect the bull run to resume soon.

🃏Meme Corner

Please give your comments and feedback on this report. See you in the next block.

Sandeep Goenka,