Tracing Capital Flows | Amznusa.com

Executive Summary

Bitcoin has reclaimed the Short-Term Holder cost basis ($61.9k) and 200DMA ($63.9k) following a 0.50% interest rate cut by the Federal Reserve.Short-term holders are under marginally less pressure as prices rise above their cost basis, after a period of net capital outflows.New investors show a degree of resilience, seen in realized losses being of a relatively small magnitude, suggesting confidence in the overall uptrend.The perpetual futures market displays a cautious recovery in sentiment, with gradually increasing demand but still below levels seen during strong bull markets.

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View all charts in this edition inย The Week On-chain Dashboard.

A Shift in Market Gradient

The capital inflow into the Bitcoin network slowed down after the market reached the March ATH, resulting in diminishing price momentum. This can be confirmed by comparing the smoothed 155-day gradient of Price โฌ› against that of the Realized Price ๐ŸŸง.

The market gradient had fallen into negative values over recent weeks, with the realized price gradient being positive, but trending lower. This indicates that downside in the spot price waqs more aggressive than the intensity of capital outflows.

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The next chart measures the z-score of these two gradients. Negative values can be interpreted as periods of relatively weak demand, resulting in a sustained contraction of prices.

Using this metric, we can see that the current structure is very similar to the 2019-20 period, where the market experienced an extended consolidation range after a strong rally in Q2-2019.

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New Capital Flow Direction

The current consolidation phase has pushed the spot price below the cost-basis of several short-term holder sub-cohorts since late Jun 2024 (MVRV Ratio <1). This highlights how recent investors have been under financial pressure, nursing increasingly larger unrealized losses.

However, despite many new investors being underwater on their holdings, the magnitude of their unrealized losses are notably less severe than the mid-2021 sell-off, and the March 2020 COVID crash.

Live Chart

When the market enters a prolonged regime of contraction, diminishing returns motivate investors to cash out at lower prices, cutting their losses. Thus, the cost basis of relatively young supply tails the spot price lower. The repricing of short-term holder supply to lower prices values can be characterized as a net capital outflow from the Bitcoin ecosystem.

To gauge the direction and intensity of capital flows from the perspective of new investors, we have constructed an indicator which compares the cost basis of two sub-groups (1w-1m as the fast trace, and 1m-3m as the slow trace).

Capital Outflows ๐ŸŸช During downwards trending markets, the cost basis of the youngest coins (1w-1m ๐ŸŸ ) declines faster than the older age cohort (1m-3m ๐Ÿ”ด). This structure indicates that the overall direction of capital flows is negative, and the intensity of this outflow is proportional to the deviation between these traces.Capital Inflow ๐ŸŸฆ During market up-trends, the cost basis of younger coins expands faster than that of the older age band. This indicates that capital is flowing in at a rate proportional to the divergence between these traces.

The cost basis of younger coins is currently trading below that of older coins, suggesting the market is experiencing a net outflow regime. Utilizing this indicator, a sustainable market reversal may be in its early stages of developing positive momentum.

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Confidence of New Investors

As the unrealized losses held by new investors grows during a market correction, their tendency to capitulate at a loss tends to increases accordingly. Short-term holders have been statistically shown to be more sensitive to volatility, making their behavior useful to track around market inflection points.

When checked alongside MVRV by Age, the SOPR by Age indicators show almost identical behavior. This confirms that new investors have both been underwater on their holdings, and experienced sufficient stress to crystallise those losses.

Live Chart

We can also assess the intensity of the reaction by Short-Term Holders to any shifts in market sentiment.

The difference between the cost basis of new investors who are spending ๐ŸŸ  and the cost basis of all new investors ๐Ÿ”ต shines a light into their aggregate confidence. When normalized by the spot price, this deviation enables us to highlight periods when new investors overreact to extremely high unrealized profit or loss conditions.

Over recent months, new investors who acquired their coins over the last 155 days have shown a comparatively higher confidence in the market that previous โ€˜bearish trendsโ€™. The magnitude of losses locked in by this cohort remain relatively low compared to the cost basis of their holdings.

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A Long-Side Perpetual Premium

We can use the perpetual futures market to add another dimension to our investigation of the confidence of new capital in the uptrend. First we employ the Futures Perpetual Funding Rate (7D-MA) to shows the appetite of speculators for paying a higher interest rate to take on leverage for long positions.

Considering the funding rate value of 0.01% is an equilibrium value on many exchanges, we look for deviations above this level as a threshold of bullish sentiment. The recent price bounce has been paired with a relative warming up of long-biased leverage in perpetual markets. This has pushed the weekly average funding rate to 0.05%.

Whilst this is above the equilibrium level, it does not yet indicate a strong or excessive degree of long-biased demand in perpetual markets just yet.

Live Chart

If we calculate the cumulative monthly premium that long side contracts have paid to the short side over the last 30-days, we can see that the total cost of leverage around the March ATH was around ~$120M per month.

This indicator has plunged to $1.7M per month as of mid September, with only a modest uptick to $10.8M per month today. Therefore, demand for long-leverage has increased over last two weeks, but is still considerably lower than it was in January 2023. This speaks to a market which has cooled off significantly during this correction.

Live Workbench

Summary and Conclusion

The Bitcoin market has remained within a lengthy consolidation phase, which is very reminiscent of the period from late 2019 and into early 2020. The capital inflow into the Bitcoin network has slowed down since the March ATH, which has challenged Short-Term Holder profitability.

However, despite experiencing a local period of net capital outflow, the confidence of new investors in the market has been remarkably robust. In recent weeks, there has also been a very modest uptick in long-side bias in perpetual futures markets.

Overall, this paints a picture of a market which has cooled down from the excesses seen in March, whilst not breaking the sentiment of many new Bitcoin investors.

Disclaimer: This report does not provide any investment advice. All data is provided for information and educational purposes only. No investment decision shall be based on the information provided here and you are solely responsible for your own investment decisions.

Exchange balances presented are derived from Glassnodeโ€™s comprehensive database of address labels, which are amassed through both officially published exchange information and proprietary clustering algorithms. While we strive to ensure the utmost accuracy in representing exchange balances, it is important to note that these figures might not always encapsulate the entirety of an exchangeโ€™s reserves, particularly when exchanges refrain from disclosing their official addresses. We urge users to exercise caution and discretion when utilizing these metrics. Glassnode shall not be held responsible for any discrepancies or potential inaccuracies.ย Please read our Transparency Notice when using exchange data.

Join ourย Telegramย channel.For on-chain metrics, dashboards, and alerts, visitย Glassnode StudioFor automated alerts on core on-chain metrics and activity on exchanges, visit ourย Glassnode Alerts Twitterย  ย In the wake of the Federal Reserve’s 0.5% interest rate cut, Bitcoin has reclaimed the Short-Term Holder cost basis of ~$61.9k. This rally could achieve technical significance if the price also holds above the 200-day moving average at $63.9k.ย 

Amazon.com: Its Role in the U.S. Industry

Introduction

Amazon.com, often simply referred to as Amazon, has transformed from an online bookstore into a colossal global conglomerate that has fundamentally altered the landscape of retail, technology, and numerous other industries. Founded in 1994 by Jeff Bezos, Amazon’s rapid growth and diversification have made it a central player in the U.S. economy. Its impact is felt across various sectors, including e-commerce, logistics, cloud computing, entertainment, and even artificial intelligence. This article explores Amazon’s role in the U.S. industry, examining its influence, achievements, and the challenges it faces.

The Rise of Amazon.com

Origins and Early Growth

Amazon began as an online bookstore in Bezos’s garage in Bellevue, Washington. The vision was simple but revolutionary: to create an online platform where people could buy books. Bezos recognized the potential of the internet to disrupt traditional retail and chose books as his starting point due to their wide appeal and ease of distribution. By offering a vast selection and competitive prices, Amazon quickly gained a foothold in the market.

The company’s initial public offering (IPO) in 1997 marked the beginning of its journey toward becoming a dominant player in the U.S. and global markets. Amazon’s early success was driven by its focus on customer satisfaction, an extensive inventory, and a commitment to fast and reliable delivery. This focus laid the foundation for its expansion into other product categories and services.

Diversification and Expansion

Amazon’s diversification strategy began with the introduction of new product categories, such as electronics, toys, and apparel. This move positioned Amazon as a one-stop shop for consumers, significantly expanding its customer base. The company also introduced its marketplace platform, allowing third-party sellers to offer their products alongside Amazon’s own inventory. This not only increased the variety of products available but also created a new revenue stream for the company through commissions on sales.

One of the most significant milestones in Amazon’s diversification was the launch of Amazon Web Services (AWS) in 2006. AWS provided cloud computing services to businesses, enabling them to rent computing power and storage rather than investing in expensive infrastructure. This service quickly became a cornerstone of Amazon’s business, contributing significantly to its profitability and establishing Amazon as a leader in the tech industry.

Amazon’s Role in E-Commerce

Transforming Retail

Amazon’s impact on the retail industry cannot be overstated. It has revolutionized the way consumers shop, shifting much of retail activity from brick-and-mortar stores to online platforms. The convenience of shopping from home, coupled with Amazon’s vast selection and competitive pricing, has led to a fundamental change in consumer behavior. This shift has forced traditional retailers to adapt, leading to the rise of omnichannel strategies that integrate online and offline sales.

The concept of “one-click shopping,” patented by Amazon in 1999, further streamlined the online shopping experience. This innovation reduced the friction in the purchasing process, contributing to higher conversion rates and reinforcing Amazon’s dominance in e-commerce. Additionally, Amazon Prime, launched in 2005, offered customers free two-day shipping and other benefits for an annual fee, further solidifying customer loyalty and increasing the frequency of purchases.

Impact on Small Businesses

While Amazon has provided opportunities for small businesses through its marketplace platform, it has also posed challenges. On the one hand, small businesses gain access to a vast customer base and the logistics infrastructure that Amazon offers. On the other hand, they face intense competition, not only from other third-party sellers but also from Amazon itself. The company’s ability to undercut prices and its control over the marketplace platform have led to concerns about fairness and market power.

Moreover, Amazon’s algorithms and data-driven approach to retail have raised questions about the transparency of how products are promoted and priced on the platform. Small businesses often struggle to achieve visibility without spending on Amazon’s advertising services, which can be costly. Despite these challenges, many small businesses continue to rely on Amazon as a vital sales channel, underscoring its central role in the U.S. retail industry.

Amazon in the Logistics and Supply Chain Industry

Revolutionizing Logistics

Amazon’s impact extends beyond retail into logistics and supply chain management. To fulfill its promise of fast and reliable delivery, Amazon has invested heavily in building a sophisticated logistics network. This network includes a vast network of fulfillment centers, advanced robotics, and a growing fleet of delivery vehicles, including drones.

Amazon’s logistics capabilities have set new standards for the industry. The company has pushed the boundaries of what is possible in terms of speed and efficiency, challenging traditional logistics providers like FedEx and UPS. Amazon’s commitment to customer satisfaction has driven innovations such as same-day and even one-hour delivery in select areas, further raising consumer expectations.

In-House Logistics Services

In recent years, Amazon has taken steps to reduce its reliance on third-party logistics providers by expanding its in-house delivery capabilities. The launch of Amazon Logistics, a service that uses independent contractors to deliver packages, is a testament to this strategy. This move has enabled Amazon to exert greater control over the delivery process and reduce costs.

However, this expansion has not been without controversy. Amazon’s use of independent contractors has sparked debates about labor practices and the gig economy. Critics argue that Amazon’s business model places financial and physical burdens on its delivery drivers, who are often classified as independent contractors rather than employees. This classification exempts Amazon from providing benefits and protections typically afforded to employees, such as health insurance and minimum wage guarantees.

Amazon Web Services: The Backbone of the Internet

Dominating Cloud Computing

Amazon Web Services (AWS) has emerged as one of the most significant contributors to Amazon’s success. As the leading provider of cloud computing services, AWS powers a vast portion of the internet, supporting everything from startups to large enterprises. Its services include computing power, storage, databases, machine learning, and more.

AWS’s dominance in cloud computing has had a profound impact on the tech industry. By providing scalable and cost-effective solutions, AWS has lowered the barriers to entry for new businesses, fostering innovation and entrepreneurship. Companies no longer need to invest heavily in physical infrastructure; instead, they can rent the necessary resources on demand from AWS.

Economic Impact and Innovation

The success of AWS has not only boosted Amazon’s financial performance but also contributed to the broader U.S. economy. AWS has created jobs, driven innovation, and supported the growth of numerous tech companies. Its services have become integral to the operations of many businesses, from streaming services like Netflix to financial institutions and government agencies.

AWS’s role in advancing technologies such as artificial intelligence and machine learning has also been significant. By making these technologies accessible through cloud services, AWS has enabled companies to develop new applications and services that were previously out of reach. This has spurred growth in sectors such as healthcare, finance, and entertainment.

Amazon’s Influence on Entertainment and Media

Amazon Studios and Prime Video

Amazon’s foray into the entertainment industry began with the launch of Amazon Studios and Prime Video. These platforms have become key players in the streaming wars, competing with giants like Netflix, Disney+, and HBO Max. Amazon Studios produces original content, including critically acclaimed series like The Marvelous Mrs. Maisel and The Boys, as well as feature films.

Prime Video, available as part of the Amazon Prime membership, has become a major driver of subscriber growth. By offering a mix of original content and licensed programming, Amazon has been able to attract a diverse audience. The company’s investment in high-quality content has not only boosted its streaming service but also positioned it as a significant player in Hollywood.

Impact on the Publishing Industry

Amazon’s origins as an online bookstore continue to influence the publishing industry. The company has become the largest bookseller in the world, both in physical books and e-books. The Kindle, Amazon’s e-reader, revolutionized the way people consume books, making digital reading mainstream.

However, Amazon’s dominance in the book market has raised concerns among publishers and authors. The company’s pricing strategies and negotiation tactics have led to disputes over revenue sharing and control. Amazon’s influence over the publishing industry extends to self-publishing, where its Kindle Direct Publishing platform allows authors to bypass traditional publishers and reach readers directly. While this has democratized publishing, it has also led to an oversaturation of the market and challenges in quality control.

Challenges and Criticisms

Regulatory Scrutiny

Amazon’s immense size and influence have made it a target for regulatory scrutiny. In the U.S. and abroad, lawmakers and regulators have raised concerns about the company’s market power, labor practices, and treatment of third-party sellers. Antitrust investigations have been launched to determine whether Amazon engages in anti-competitive behavior, such as favoring its own products over those of third-party sellers on its platform.

The company’s expansion into various industries has also led to concerns about its dominance and potential to stifle competition. Critics argue that Amazon’s control over data, logistics, and retail gives it an unfair advantage, making it difficult for smaller companies to compete. In response, there have been calls for greater regulation and even the potential breakup of Amazon into smaller entities.

Labor Practices and Workers’ Rights

Amazon’s labor practices have come under intense scrutiny, particularly in its fulfillment centers and delivery network. Reports of grueling working conditions, high injury rates, and inadequate breaks have sparked widespread criticism. Workers have organized protests and strikes, demanding better pay, safer working conditions, and the right to unionize.

The company’s use of technology to monitor and manage workers has also raised ethical concerns. Amazon’s reliance on algorithms to track productivity and enforce performance targets has been criticized for creating a dehumanizing work environment. The company’s resistance to unionization efforts has further fueled debates about workers’ rights and corporate responsibility.

Environmental Impact

As one of the largest companies in the world, Amazon’s environmental impact is significant. The company’s vast logistics network and rapid delivery services contribute to carbon emissions and packaging waste. Amazon has faced criticism for its role in driving consumerism and its contribution to environmental degradation.

In response, Amazon has pledged to become more sustainable. The company launched the Climate Pledge in 2019, committing to reach net-zero carbon emissions by 2040. Amazon has also invested in renewable energy, electric delivery vehicles, and sustainable packaging. While these efforts are a step in the right direction, critics argue that more needs to be done to address the environmental impact of the company’s operations.