This article was originally published on ETFTrends.com.
The summer rally in stocks and bonds has been fizzling out as recession fears start to permeate through the capital markets. Bitcoin has been following traditional assets as of late and has fallen below $20,000 after a summer rally of its own above $25,000.
Digital currencies have been following stocks and bonds on the way down for most of 2022, digressing from their status as an uncorrelated asset. All eyes will continue to be on central bank strategy as the Federal Reserve looks to continue tightening monetary policy to guide the economy to a soft landing.
However, one metric that could hint at a future bullish prices for bitcoin is dormant supply peaks. Independent research has shown that bitcoin has had a tendency to see price spikes after the percentage of circulating supply sees inactivity for at least a year.
Per a CoinDesk report explaining this metric, this was last witnessed on January 16. The percentage of dormant circulating supply peaked and was subsequently followed by a massive run higher as bitcoin went from $450 to $20,000.
"Dormant supply peaks are springboards for upwards price action," Nik Bhatia, author of "Layered Money: From Gold and Dollars to Bitcoin and Central Bank Digital Currencies," and market analyst Joe Consorti said in the Bitcoin Layer newsletter.
"If two-thirds of bitcoin is off the market (not for sale) for an extremely long period of time, the price is driven up when more buyers enter the market bidding for a finite supply—a scenario that has played out in bitcoin twice before," Bhatia added.
Getting Bitcoin Exposure Via Futures
If investors have bullish notions for bitcoin's price for the duration of 2022 and beyond, they can look to get exposure via futures as opposed to the actual cryptocurrency. Whether it's for strategic exposure to bitcoin or to simply get portfolio diversification in the leading digital currency, exchange traded funds (ETFs) that focus on bitcoin can provide this alternative.
As an option for placing bitcoin on a public exchange, investors can also opt for getting exposure to futures contracts in bitcoin via the ProShares Bitcoin ETF (BITO). With cryptocurrency regulation still in its infancy, BITO will allow investors to get bitcoin exposure on a traditional market exchange, thereby reducing the risk of a public exchange going out of business.
Furthermore, BITO is actively managed, giving investors dynamic exposure to the bitcoin futures market. This puts portfolio management in the hands of market professionals who can increase or reduce exposure to contracts, given the current nature of the ever-changing, volatile crypto market.