10 days ago, Bitcoin underwent a major breakout that broke the bear market structure.

Together, we’ve been tracking this bear market structure. We’ve compared the cascade of events to the previous cycle, from the largest crypto leverage flush, to treasury companies becoming net sellers, to the Digital Credit stress test, and eventually the Coldcard hack and chain split.

These last two events had a major impact on hodler sentiment, but weren’t able to push price further down. This was a first signal that the Digital Credit stress test was a likely candidate to mark the bottom.

This was followed by evidence of institutions accumulating during the bottom formation. Q2 2026 13F filings revealed an institutional bullish divergence: while Bitcoin’s price declined, institutional ETF holdings increased.

With price moving sideways and key resistance levels trending down, we were patiently waiting to test those resistance levels over the next months. But that breakout came significantly stronger and faster than expected, and we’ve been on top of this development.

In today’s newsletter, I’ll provide you with the latest important insights regarding this breakout. While it’s too early to be 100% certain we’re back in a bull market, there are still a few things standing in the way of confirmation. Let’s go through them.

But before we continue, earlier this week I joined Roxom’s live State of the Bitcoin Markets to discuss the breakout. You can find the link to that discussion here.

What’s Standing in the Way of Confirming the Bull Market?

The following two key points are reasons to remain skeptical about this development:

• 4-year cycle timing

• Not reaching deep undervaluation levels

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👉 Key insight: Marking the Digital Credit stress test as the bottom, as shown in the spiral chart above, would mean the bear market bottom is off by roughly 4 months.

Let’s discuss the 4-year cycle timing, deep undervaluation levels, and what the data tells us. I’ve got three important charts for you!

4-Year Cycle Timing

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Bitcoin is slamming through key levels, most importantly breaking back above the Short-Term Holder Cost Basis, one of the most important on-chain levels for differentiating between bull and bear market conditions.

Over the past weeks, we’ve been discussing how STH Momentum has been forming higher lows and how the next bull market might be closer than most think. As I’ve mentioned, the last day of the bear market is also the first day of the bull market!

Last week, we provided very important evidence around the main driver of this cycle, institutional demand: an institutional bullish divergence. While Bitcoin’s price declined, institutional ETF holdings increased. Institutional adoption remained surprisingly strong during this bottom formation.

In last week’s live appearance on Roxom, I also discussed how the Digital Credit stress test might have marked this cycle’s low, while Bitcoin was still undergoing its time capitulation. We looked at how the STH Cost Basis was trending down while price kept moving sideways, and I expected Bitcoin to keep pushing against this level and break through within the next two months. But here we are, instead of it taking two months, it only took a week.

After the Coldcard hack and BIP-110 chain split, it was becoming difficult to find another Bitcoin-specific catalyst capable of pushing price significantly lower. However, based on the 4-year cycle, we still had potentially 2 months left to form a bottom. We therefore needed to stay grounded, and couldn’t entirely rule out one more leg down.

Today, however, the market is breaking through key levels and giving us new information.

Bitcoin Slams Through Key Levels: What Does This Mean?

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👉 Key Insight: Breaking this decisively through the key resistance levels has historically marked the end of the bear market.

But there are some important caveats. Next, we’ll compare this breakout to previous cycles, discuss whether the bottom is really in, and the role institutional demand is playing here.

Comparing Breakouts

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In this week’s live appearance on Roxom’s State of the Bitcoin Markets show, I discussed price action and classified this cycle as the cycle of Institutional Adoption and maturity, with the main catalyst being the ETF approval.

We have discussed over and over how the main gateways for institutional adoption have been ETFs and treasury companies.

That’s why, at Bitcoin Strategy, we’ve consistently published a quarterly institutional adoption report based on the latest institutional ETF holdings. The data is gathered from SEC 13F filings, which include institutions with over $100M in assets under management (AUM) that are required to report, aka the smart money.

Yesterday was the deadline, and the latest data for institutional ETF holdings in Q2 2026 came in.

In today’s newsletter, we’ll discuss the latest insights from these filings, a proxy for institutional adoption of Bitcoin. Let’s jump right in!

Institutional Adoption Report: Q2 2026

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👉 Key insight: During Q2, Bitcoin’s price declined 14.2%, while institutional holdings increased 7.5%. This bullish divergence shows institutions continued accumulating during Bitcoin’s bottom formation.

Institutional Share of ETF Holdings

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Total ETF holdings dropped from 1,297,010 BTC to 1,211,322 BTC, a 6.6% decline, while institutional holdings increased from 498,389 BTC to 535,723 BTC, a 7.5% increase.

👉 Key insight: While total ETF holdings declined, institutions added to their positions, raising the institutional share from 38.4% to 44.2%, a new all-time high!

Top 25 Largest ETF Holders

Below are the top 25 largest institutional Bitcoin ETF holders.

Go to institutional page

👇 Key insights:

• 17 of them increased their positions this quarter.

• Wells Fargo and JPMorgan Chase both added over 10k BTC.

• Abu Dhabi sovereign wealth funds increased their position.

New Institutions

Below is a list of new entrants with a first time allocation of 100+ BTC.

What stands out is Ameriprise, a large mainstream US wealth-management and financial-services firm with more than 10,000 financial advisors and about $1.7T in assets under management.

This is another confirmation that Bitcoin has become a mature institutional-grade asset and is finding its way into traditional wealth management by being gradually included by financial advisors. A very positive development.

The other new entrants are mainly hedge funds and investment managers, with Context Capital Management and Compass Rose Asset Management making the largest new allocations at $191M and $122M, respectively. While perhaps less noteworthy names, these are still large new positions and a positive sign of continued institutional adoption.

Number of Institutions

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The number of institutions reporting Bitcoin holdings through their 13F filings dropped from roughly 2,000 in Q1 to nearly 1,900 in Q2, a 6.8% decrease.

This shows that the bear market has still been brutal out there. While overall institutional holdings increased, some institutions were still forced or scared out of their positions.

Closing Thoughts

The institutional data that came in is really above my expectations. Considering the phase of the bear market and price action, I didn’t expect to see such a large increase. Total institutional holdings nearly surpassed the number we saw at the cycle peak.

This confirms that institutions see the current price as an attractive entry level. Together with the recovery from the recent Digital Credit stress test, it increases the chances of recovery.

I hope you appreciate this bullish divergence! As always, I try to provide you with the best data and insights. I’d love to read your comments and thoughts. 👊 🧡

Until next week, 🫡

-Root

What an absolutely crazy week, with everything going on around the Coldcard incident and the upcoming BIP-110 chain-split risk this Saturday.

Joe Burnett, VP of Bitcoin Strategy at Strive and host of The Mustard Seed Podcast, had me on to discuss the ongoing events. We covered the Coldcard incident, BIP-110, Bitcoin’s bottom formation, and the current price action, using a full set of key on-chain charts!

Watch The Full Episode Here:

👇 Key Topics (Including Links to Live Charts)

Go to live chart

Coldcard Incident

• A tragedy for self-custody

• CDD, transfer volume, and fees, showing a visible but not FTX-style on-chain impact

• Entropy and seed generation

• Coldcard’s development process was below industry standard

• New AI era: security breaches and faster code review

• Protecting yourself: multisig vs. a single seed

• Self-custody will come out of this stronger

• Increased momentum for future upgrades, such as CTV for vaults and timelocks

Chain Split, BIP-110 & Spam on Bitcoin

• BIP-110’s likely chain split on Saturday, August 8

• On-chain fees: spam is not pricing out monetary use

• Storing spam on-chain: outputs, witness data, and OP_RETURN

• Pushing spam into worse places

• Pushing a low-consensus soft fork

On-Chain & Cycle Analysis

• Bitcoin Spiral: where we are in the 4-year cycle

• STH Momentum: ongoing capitulation, but higher lows

• The bottom formation: Price and time capitulation

• How recent events fit into the bear market bottom formation

Digital Credit & ETF Flows

• STRC and SATA drawdowns during the Digital Credit stress test

• Early signs of recovery back toward par

• IBIT outflows and how ETF selling added pressure

• Treasury companies, Digital Credit, and their role in dampening downside pressure

Key Resistance Levels

• Bitcoin around $64k, with the STH Cost Basis near $69k

• Realized Price around $53k and CVDD around $46k

• Key resistance levels: the STH Cost Basis, 200-day moving average, and 21-week moving average

• Why Bitcoin likely needs time before a stronger recovery can begin

Macro & Midterms

• Bitcoin following the 4-year cycle

• ISM PMI rising and the S&P 500 at ATHs

• Midterm elections

As a paid subscriber, you get access to the live charts and indicators used throughout the episode, so you can keep tracking these developments yourself.

I hope this podcast provides you with useful insights and answers most of the questions around the Coldcard incident, BIP-110, and the ongoing bottom formation. If you have more doubts, feel free to share them in the comments. Your thoughts and feedback are always welcome! 🧡 👊

Until next week, 🫡

-Root

Over the past weeks, we have been comparing this bottom formation to previous cycles and analyzing it from many angles, including the On-Chain Value Map, CVDD, Realized Price, STH Bands, and Capitulation Zones.

We have also discussed the possibility of a final leg down. In the previous cycle, it took an FTX-style event for that to happen.

This bear market is progressing with its own set of events: treasury companies became net sellers, chain-split risk is on the rise due to BIP-110, and an even more immediate and important threat emerged: a serious vulnerability affecting seed phrases generated by Coldcard hardware wallets, resulting in many wallets being swept.

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A Dark Day for Self-Custody

This is one of the darkest days for self-custody. People who secured their Bitcoin with a respected hardware wallet and believed they had done everything right are now having their wallets drained. As we watch the Coldcard situation unfold, there is confusion, fear, and a growing number of victims.

My heart goes out to everyone affected, and I truly hope you are unaffected. If you generated a seed on an affected Coldcard, please take action as soon as possible, but carefully.

My hope is that many Coldcard users, who are generally more tech-savvy, have protected themselves against this type of attack.

In this newsletter, I will explain what happened and what we can do to protect ourselves against similar attacks in the future, which will get more common with advances in AI.

AI Threat

Most likely, AI has been used to review old versions of the open-source firmware and discover the vulnerability. However, this has not been proven. But it is clear that AI models allow attackers to inspect software much faster and identify vulnerabilities that are much more difficult to find through conventional code review. Therefore, especially if you use a single seed setup, whether with a Coldcard or another hardware wallet, read this newsletter carefully.

Affected Versions

The most serious vulnerability affects seeds generated on a Coldcard Mk3. Independent analysis also flagged some Mk2 devices. Seeds generated on affected versions of the Mk4, Mk5, and Q are also at risk. However, these later devices retained more entropy, making them much more difficult to attack.

👉 Key insight: This is a seed-generation vulnerability.

If you created the seed somewhere else and only imported it into the Coldcard, that seed was not generated through the vulnerable process.

Updating the firmware does not repair an existing vulnerable seed. You need to generate a completely new seed, preferably with a different hardware wallet provider, and move the funds to the new wallet.

If you added physical dice rolls when generating your seed, you should be secure.

Randomness

A secure seed phrase depends on randomness, but computers are deterministic, which means they follow programmed instructions. Creating truly unpredictable numbers therefore requires carefully designed Random Number Generators and secure sources of physical randomness.

Coldcard’s seed generation was not implemented correctly due to an integration error. For Mk3 devices, the software generator was mainly initialized using device information and timing data. These values could look random but were potentially predictable or reconstructable. The later Coldcard models added randomness from secure elements, which made them safer than the Mk3, but the implementation still did not provide the intended level of security.

Entropy

The difficulty of guessing a seed phrase is expressed through entropy.

• A normal 12-word seed contains 128 bits of entropy.

• A normal 24-word seed contains 256 bits of entropy.

The Coldcard Mk3 seeds only seem to have around 40 bits of entropy.

Affected Mk4, Mk5, and Q seeds are estimated to have around 72 bits of entropy, much lower than the intended 128-bit security target.

👉 Key insight: Guessing the vulnerable Coldcard seeds was roughly as difficult as guessing four missing words from your seed.

40 bits still represents many possible combinations, but as we are finding out, it is not enough against specialized brute-force attacks. Unfortunately, in the case of Coldcard, their 24 words did not create additional security, they simply encoded more of the limited randomness generated by the vulnerable process.

Other Hardware Wallets

I generally do not expect other hardware wallets to fail the minimum 128-bit security target. After all, this is supposed to be one of the most important parts of their core business.

The conclusion is that Coldcard’s development process was truly below par. A simple apology doesn’t cut it, in my opinion.

👉 Key insight: The valuable lesson is that you shouldn’t trust your life savings to a single seed. While I generally expect other hardware wallets to be secure, the rise of AI makes it worth protecting against these attacks.

Protecting Against These Attacks

This particular attack was only possible because everything depended on a single seed that was generated by vulnerable software. We could give up on self-custody and send our Bitcoin to an exchange or an ETF. But that, of course, introduces an entirely different set of attacks.

👉 Not your keys, not your coins.

That is not the solution. Bitcoin is about self-sovereignty.

The better approach is to remove the single seed as the single point of failure.

Multisig

Multisig allows several independent seeds to jointly control Bitcoin.

For example, a 2-of-3 multisig wallet has three separate seeds, but only two are needed to spend:

• Key A + Key B

• Key A + Key C

• Key B + Key C

Compromising only one seed is not enough.

👉 Key insight: With 2-of-3 multisig, one weak seed, one hacked device, or one compromised location does not need to result in lost funds.

Migrating to Multisig

If you use another hardware wallet and have no reason to believe its seed is compromised, you can use that existing seed as one signer in a new multisig wallet.

You then need to generate two additional independent seeds.

Important: Your Bitcoin in the existing single-signature wallet does not automatically become multisig. You must create a new multisig wallet and send the Bitcoin to its new receiving address.

If you have an affected Coldcard seed, do not reuse that seed in the new setup. Generate a completely new one, preferably with a different hardware wallet provider.

A setup could look like this:

• Keystore 1: Hardware wallet from provider A.

• Keystore 2: A hot wallet using either a computer generated or independently generated seed.

• Keystore 3: Hardware wallet from provider B.

Each seed should be generated independently.

The devices and their backups should be stored across separate secure locations. No single location should contain enough information to reconstruct two complete signing keys.

A hot wallet using either a computer generated or independently generated seed could serve as the third option. While hot wallets are generally less secure, this still provides protection against a single weak hardware-wallet seed because the attacker would need both keys. However, one of the two keys does need to come from a hardware wallet, as we need at least one device disconnected from the internet.

Main Attack Surfaces

The main risks are:

• Weak seed generation: a device creates a predictable seed.

• Device compromise: a device, computer, or wallet application is hacked.

• Physical compromise: a device is lost, destroyed, or stolen.

We can reduce these risks through three simple principles:

• Different keys.

• Different devices.

• Different locations.

Creating the Multisig

To create the multisig, we need a tool that supports multisig, such as 👉 Sparrow Wallet. Sparrow allows us to combine the three keystores into one multisig wallet. Sparrow supports single-signature and multisig wallets and most common hardware wallets.

The multisig is defined by a descriptor, which will look like this:

wsh(sortedmulti(2, Keystore1, Keystore2, Keystore3))

The wsh means the wallet uses SegWit, a newer way Bitcoin transactions are structured. The sortedmulti means the order of the keystores does not matter because they are sorted automatically. The 2 means that at least two signatures are needed.

The three keystores represent the extended public-key information from the three individual seeds. Sparrow does not need the private keys from hardware wallets.

When you want to spend:

1. Sparrow creates the transaction.

2. You sign it with one device.

3. You sign the same transaction with either of the other two devices.

4. Sparrow combines and broadcasts the completed transaction.

The three signing devices do not need to communicate with each other or be connected at the same time.

Additional Burden of Multisig

The seeds are not the only backups you need.

It is best to back up the multisig wallet descriptor, as it contains the following information:

• The 2-of-3 policy.

• The three extended public keys.

• Their fingerprints.

• Their derivation paths.

• The wallet’s script type.

With this information, the descriptor tells the wallet software how the three seeds form the wallet. Sparrow can export an output descriptor as a text file or display it as a QR code that you can save and print.

It is best to keep a copy of the descriptor at each location. If the descriptor is lost, you should still be able to reconstruct it, but you would need all three seeds or devices instead of two.

Keep It Simple

Multisig removes the single point of failure, but it introduces more complexity. A single-signature setup may still be a good solution, depending on the value and risk tradeoff in your personal situation. However, if you do consider moving to multisig, consider the following.

Before moving substantial funds:

• Practice with a small amount.

• Confirm that all three devices recognize the wallet.

• Verify receiving addresses on the signing devices.

• Complete a test spend using different combinations of signers.

• Test whether you can restore the wallet from your seeds and descriptor.

• Make sure trusted family members understand the recovery process.

The purpose is to keep things as simple as possible while ensuring that no single failure can destroy our savings.

Wrap-Up

I sincerely hope you are not affected by this terrible incident.

I am heartbroken for the victims because many believed they had done everything right. They bought a respected hardware wallet and trusted the device to generate their seed securely. This is a serious setback for the community. Trust in hardware wallets and self-custody has understandably been damaged.

But abandoning self-custody is not the answer. Bitcoin itself did not fail. It was a single wallet implementation that failed, with terrible consequences.

We can protect ourselves by removing single points of failure with multisig. No setup is completely risk-free. However, compromising one seed, one device, or one location should not be enough to steal your life savings.

We learned the hard way: don’t trust, verify.

The pain is real and recent, but we will learn from this and come out stronger! 🧡

Stay safe, 🫡

Until next week, 👊

-Root

A few days ago, Elon Musk made a bold and almost existential prediction for us Bitcoiners: money will no longer matter in 2036.

With nearly 250 million followers, many of them very loyal, and given everything he is building through Tesla, SpaceX, xAI, Neuralink and humanoid robots, I felt his argument deserved to be taken seriously.

As a Bitcoin maximalist, I welcome critique and want to steelman the case for why Bitcoin will succeed.

Since his full interview is nearly 1.5 hours long, I created a short clip with all his relevant arguments in chronological order:

While listening to the interview, several of his claims triggered me:

• Money will no longer matter in 2036.

• Work will become optional.

• The Treasury should simply issue checks.

• Deflation, rather than inflation, will become the problem.

• AI and robots could create a quasi-infinite economy.

These are all enormous claims, especially for anyone who believes that sound money is essential to a free society.

I therefore addressed them in an X Article that I published today. I chose to publish it on X rather than Substack because, when responding directly to Elon Musk, I might as well do it on his own platform.

My conclusion is that AI could create extraordinary abundance and make many goods significantly cheaper. But scarcity, ownership, allocation and power will remain. AI abundance might reduce the importance of fiat money while accelerating the importance of sound money.

Read the full X Article:

Will AI Make Money Obsolete?

I hope you enjoy the article. As always, please let me know your thoughts below the article or in the comments here. 🧡 👊

Until next time, 🫡

-Root

Views are my own.

Supported by Roxom | Bitcoin-denominated capital markets.

This week, I have some great new on-chain insights for you! One of the major strengths of on-chain analysis is that, because we have access to the age of coins, we can separate investor behavior into Short-Term Holder and Long-Term Holder cohorts.

We often focus on Short-Term Holder (STH) behavior, as it is generally more responsive to price action. However, especially during bear market bottom formations, Long-Term Holders (LTH) are affected as well. Mapping the cyclical behavior of both cohorts therefore provides extremely meaningful insights.

We can analyze and compare both cohorts through:

• Cost Basis: Historically, during bear market bottom formations, the STH cost basis briefly falls below the LTH cost basis.

• Momentum: This measures how recent cost basis changes compare with their historical averages.

In this newsletter, we’ll use these methods to better understand the ongoing dynamics of the bottom formation.

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👉 Key insight: While still negative, STH Momentum has formed higher lows and appears to be moving toward positive territory. It may still take some time, but a sustained move back above zero has historically confirmed a return to bull market conditions.

Next, we’ll combine STH and LTH momentum which allows us to identify capitulation zones during bear market bottom formations. We also use the ratio between the STH and LTH cost basis to map their cyclical relationship. Both methods provide important insights into the current bottom formation. As always, I’ll provide access to the live charts, so you can track these developments yourself.

Analyzing On-Chain STH & LTH Behavior

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This week I want to discuss BIP-110, as ongoing discussions within the community have been heating up. As Bitcoin is undergoing its bottom formation, we are also going through an internal war about spam on Bitcoin. I have been following this debate for many months and understand many of the technical arguments but have never publicly spoken out because my position has been fairly neutral.

However, I now feel obligated to discuss my insights and stance, as serious chain-split risk is coming in about 3 weeks, around August 7, or more specifically block height 961,632.

But before we jump into BIP-110, I want to share the links to the latest on-chain bottom formation insights. We have been tracking this bottom formation from many on-chain angles, which gives a clear idea of what is likely to come.

• STH Bands: we used Short-Term Holder Bands to determine Bitcoin’s position in the bottom formation. We discussed how we are entering Phase 2, which historically has been close to the actual cycle bottom.

• On-Chain Value Map: we compared cycle bottoms and identified the Deep Undervaluation level.

• CVDD & Realized Price: we identified the Bottom Formation & Low Consolidation phase, where CVDD takes over as the global floor.

• Drawdown in Realized Price: we used the Realized Price to determine a potential worst-case scenario.

BIP-110

Bitcoin Improvement Proposal 110 is a proposal that limits the ways of storing arbitrary data in Bitcoin transactions. Its goal is to reduce spam and keep Bitcoin for strictly monetary use. A significant part of the Bitcoin community, including Bitcoin developer Luke Dashjr, is pushing this.

While using Bitcoin for monetary use only is a noble goal, it’s impossible to keep spam from entering Bitcoin as it can even be stored in a hash, indistinguishable from a normal transaction, hence the controversy around BIP-110.

Technically, BIP-110 is a soft fork, it makes the rules stricter. But if it is pushed without broad consensus, it will lead to a chain split. BIP-110 is using a consensus threshold of only 55% to lock in, a very low majority. Current hashrate signaling and prediction markets suggest it’s very unlikely to reach that threshold, meaning early August, unless we still see an overwhelming increase, it could result in a chain split, similar to what happened with Bitcoin Cash in 2017, a minority group splitting away from Bitcoin. Today, Bitcoin Cash (BCH) trades at only a tiny fraction of Bitcoin.

How Did We Get Here?

The debate heated up around the rollout of Bitcoin’s main node implementation Core v30 in October of 2025, where they changed a default relay parameter for OP_RETURN from 83 to 100,000 bytes. OP_RETURN is a transaction output that can be used to store arbitrary data. While there are a lot of nuances to this change (which we’ll get into below), it wasn’t received well by the community. Many Bitcoiners felt like Core was opening the door for more spam. Instead of pausing and listening to the community, Bitcoin Core pushed the change through. This gave momentum to the KNOTS movement, an alternative node implementation keeping the 83-byte standard, and a focus on reducing spam. The main figures behind KNOTS then came with BIP-110.

My Stance

As the main node implementation, Core had the responsibility to work toward consensus and listen to the community and not push through changes, even though they had their technical arguments. Core showed arrogance toward a large part of the community, and handled this very poorly.

The KNOTS movement was therefore a justified pushback and it’s healthy to have alternative node implementations.

I highly value Bitcoin’s monetary use and I do not want spam on Bitcoin. However, spam is impossible to fully stop because data can be hidden in a hash, making it indistinguishable from a normal financial transaction.

Where KNOTS was justified, BIP-110 is committing a worse mistake than Core, pushing a low-consensus soft fork.

👉 Key insight: Core pushed a low-consensus policy change, but BIP-110 pushes a low-consensus soft fork with an immediate chain-split risk.

Spam On-Chain

Before we continue to discuss the differences of the position of Core and the BIP-110 crowd, it’s necessary to first understand the different ways spam enters Bitcoin.

There are different forms of spam on Bitcoin.

• Outputs / UTXO set: this is the worst type. These outputs need to be tracked by nodes in the UTXO set and create a lasting burden on nodes.

• Witness data: this is where inscriptions mainly live. Witness data is discounted, which makes it cheaper to use for bulk data and can store 400,000 bytes.

• OP_RETURN: this is the least harmful place and can carry roughly 100,000 bytes per standard transaction. OP_RETURN outputs are provably unspendable, do not enter the UTXO set, and can be pruned by nodes. OP_RETURN could be seen as a trashcan.

👉 Key insight: Witness data has ~4x more space than OP_RETURN and is cheaper, currently the most attractive way to store spam on Bitcoin. Core v30 did not change consensus, it only changed default relay policy from 83 to 100,000 bytes. This relay policy was already bypassed, as spammers could go directly to miners and have their larger OP_RETURN transactions included in a block.

Position Core

The Core position is basically harm reduction by changing the incentives.

The idea is not that spam is good, but if spam exists anyway, you prefer it in the trashcan instead of putting a burden on all nodes. From that perspective, a bigger OP_RETURN is not pro-spam. It is an attempt to push unavoidable spam into the least harmful place.

There is another important point. Bitcoin’s chain growth is already capped by consensus. Under SegWit, block weight is limited to ~4mb. Spam can fill blocks, but it cannot make blocks grow beyond the maximum allowed size. That does not mean spam is harmless. It means spam is not an infinite storage attack on the chain itself. Spam competes for blockspace like everyone else. Price is the best filter for spam. If monetary demand outbids spam, spam gets priced out. If spam outbids monetary demand, spam pays the fee.

Position BIP-110

The pro-BIP-110 side has a strong moral argument.

Bitcoin is money and not for arbitrary data storage. From their perspective, making OP_RETURN bigger does not solve the problem, it simply gives spam another place to grow. They argue that spammers do not care about using the least harmful place. Some spammers might even prefer the worst place.

Therefore, Bitcoin should signal that spam is not welcome. BIP-110 itself also admits spam cannot be solved, but argues that forcing data to be broken up or hidden strengthens the message that Bitcoin does not support data storage as a use case.

Where the Core side is mostly focused on incentives, BIP-110 is focused a lot on signalling, even though this will become a cat-and-mouse game.

Conclusions

The BIP-110 movement implies there is an immediate threat that needs to be solved with regards to spam. But current spam entering Bitcoin is not nearly at peak levels as we saw during the Ordinal & Inscriptions hype phase. And while ideally we wouldn’t have spam, the growth rate of the blockchain is capped, whether filled with monetary transactions or spam. Hence, there is no immediate threat.

A bigger long-term threat than the size of the entire blockchain is the size of the UTXO set (the set of all unspent transaction outputs). There’s an argument to be made that BIP 110 forces spam to move to the UTXO set instead of the trashcan. Equally there’s an argument to be made on the Core side, it will invite overall more spam.

Core was wrong by pushing low-consensus node implementation policies, but BIP-110 is rushing and forcing a low-consensus soft fork.

Risk of a Chain Split

Ironically, rushing BIP-110 is a bigger immediate risk than spam itself.

· It will likely cause a chain split.

· Exchanges and wallets may pause withdrawals/deposits.

· Users could be confused about which chain they are using.

· There can be replay risk, eg. accidentally spending coins on both chains.

· Miners will waste hashpower on a minority chain.

· The minority chain can be unstable and vulnerable to reorgs.

· It creates market uncertainty and could affect price.

· It divides the community during an already fragile bear-market bottom formation.

· It sets a precedent that a low threshold, or a loud minority, can try to push consensus changes.

Further, BIP-110 specifically could limit future Bitcoin development as it limits several Taproot-related features that affect miniscript, vaults, inheritance setups, lightning channel factories and LN symmetry. The BIP-110 argument is that if these tools are truly valuable for Bitcoin’s monetary use, they can be tested elsewhere first and later be reconsidered for Bitcoin.

Wrap Up

Arbitrary data on Bitcoin cannot be fully stopped. If someone is willing to pay and miners include the transaction, data will find a way.

• UTXO spam is the worst.

• Witness spam is not ideal, especially because it is discounted.

• OP_RETURN is the least harmful place.

I would prefer a future solution where OP_RETURN is economically the best place for unavoidable spam, while witness data and UTXO spam are discouraged. Unfortunately such a solution is likely not possible with just a soft fork.

But a solution should not be rushed, and needs broad consensus. Meanwhile, fees are the most neutral spam filter.

Even though I am unhappy with how Core handled this, from a technical perspective I lean more toward Core’s harm-reduction and incentives approach than BIP-110’s cat-and-mouse approach.

Core was wrong to ignore social consensus, but BIP-110 is committing the same mistake, and worse.

I truly believe most people pushing BIP-110 have good intentions. Unfortunately, a chain split will cause some good people to permanently leave. I hope many stay and we can continue to work toward a high-consensus solution.

The uncertainty and divide can affect Bitcoin’s price, especially now, during the bottom formation, when sentiment is already weak. On the bright side, we will learn a lot from this event. Previous protocol changes were painful, but they helped clarify what Bitcoin is and how hard it is to change. Moving slow is a feature.

I hope this clarifies the ongoing discussion and upcoming events around BIP-110. With good intentions and best effort, I tried to explain the situation as I see it. I hope you found these insights useful. It’s a sensitive topic for many. If you see things differently, your constructive thoughts and opinions are appreciated. 🧡 👊

Until next week, 🫡

-Root

Views are my own.

Supported by Roxom | Bitcoin-denominated capital markets.

This week, we’ll use a different on-chain approach, based on STH Bands, to determine Bitcoin’s position in the bottom formation and why it supports my personal DCA approach.

Over the past weeks, we’ve used different on-chain methods to analyze the cycle bottom. Each method brought new insights, and there has been strong confluence among them.

• On-Chain Value Map: we compared cycle bottoms and identified the Deep Undervaluation level.

• CVDD & Realized Price: we identified the Bottom Formation & Low Consolidation phase, where CVDD takes over as the global floor.

• Drawdown in Realized Price: we used the Realized Price to determine a potential worst-case scenario.

From both a cycle perspective and multiple on-chain indicators, it is clear that Bitcoin is undergoing its bottom formation.

Personal update (not financial advice): I’ve shared my personal approach before, including how I took profits at $97k in mid-January in preparation for a bear market. I have now started my monthly DCA, which I will keep doing for the next couple of months. The idea isn’t to catch the possible wick that marks the exact cycle bottom, but to average in during the remainder of the bottom formation.

This week, we’ll analyze the bottom formation from the perspective of STH Bands. The STH Bands are based on the Short-Term Holder Cost Basis and represent max-pain levels where Short-Term Holders typically hold at a loss before capitulating. When Bitcoin transfers from weak hands to strong hands, these levels often act as major support zones.

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👉 Key insight: In each cycle, Bitcoin reached the STH Floor during the bottom formation, followed by a move around the STH Mezzanine level. This cycle, Bitcoin only fell below the STH Mezzanine during the February drop and never reached the STH Floor.

Up next: STH Bands combined with the Realized Price allow us to determine Bitcoin’s position in the bottom formation and reveal important insights about the February drop.

STH Bands: The Bottom Formation

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I’ve got a brand-new podcast episode for you! Last week, I recorded a great conversation with Pete Rizzo, The Bitcoin Historian, and the episode just went live. It fits perfectly with the current market and the topics we’ve been discussing over the past weeks.

We covered where Bitcoin is in the cycle, why the 4-year cycle remains intact, the Low Consolidation phase, treasury companies, and the path toward a Bitcoin standard. The parts on the Bitcoin Spiral and bottom formation are my personal favorites. Make sure you don’t miss those.

As a paid subscriber, you get access to all live charts and indicators, and together we’ll continue dissecting this bottom formation over the coming weeks. For links to the live charts, see the list below!

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Watch the full episode here:

Key Topics + Links to Live Charts

Where We Are in the Cycle

• Bitcoin around $60k and why a lower low is still possible

• The Low Consolidation phase

• Realized Price around $53.5k

• CVDD around $45.2k

The 4-Year Cycle

• The Bitcoin Spiral

• Why the 4-year cycle remains intact

• The diminishing impact of the halving

• The role of the business cycle

• Why Bitcoin psychology is still following the classic cycle structure

Bear Market Structure

• Key resistance levels

• The 200-day moving average

• The 21-weekly moving average

• STH cost basis around $71.6k

• Why Bitcoin rejected off these levels

• What I want to see before turning more bullish

Bottom Formation

• Comparing the current bottom formation to 2022

• The February drop versus the June 2022 drop

• Why the market moved into the Low Consolidation phase

• Why 2022 needed an FTX-style event to make a lower low

• Why another lower low is possible, but not necessary

• The potential dampening effect from treasury company demand

Treasury Companies

• Why treasury companies are getting the blame

• Treasury companies as one of the main sources of demand

• mNAV blow-offs and the first real stress test

• Retail hype phase around treasury companies

• Are treasury companies here to stay?

Institutional Adoption

• Institutional ETF adoption through 13F filings

• Why institutional adoption is still in an uptrend

The Path Toward a Bitcoin Standard

• ETFs and treasury companies as a bridge

• Constrained fiat capital and why it can’t move directly into self-custody

• Co-opted by fiat, or the trojan horse?

The Road Back to a Bull Market

• Reclaiming key resistance levels

• Resistance near the $100k level and $2 trillion market cap

• What the next exponential trend could look like

• Gradually or suddenly?

• Gold parity

• The best entry zone

As always, your comments and thoughts are appreciated! 🧡👊

Until next week, 🫡

-Root

Bitcoin barely made a new low and sentiment is completely crushed. Historically, during each bottom formation, we have dropped from Undervalued to Deep Undervaluation before eventual capitulation.

In this newsletter, we’ll use on-chain expertise to compare the current bottom formation to previous cycles, revealing very valuable information: the Deep Undervaluation level.

The Hodlers’ Cheat Sheet: Where Are We in the Cycle?

👉 Key insight: We are moving from the “Why am I getting margin called?” phase to the “Shit, everyone is selling” phase.

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Over the past months, we’ve been mentally preparing for this scenario. We covered where and when the bottom could be if we had to go through maximum pain.

We have discussed how treasury companies have been the main provider of demand during this bear market. Ironically, as they got heavily criticized, that source of demand is now being impacted as products like Digital Credit are trading well below par value.

Less demand from treasury companies means less of a dampening effect, exactly what we are currently experiencing in price action.

Coming Up

• Last Monday, I recorded a show with The Bitcoin Historian: Pete Rizzo. This should come out soon!

• Next Thursday, July 2 at 12 PM GMT-3, I will be joining a webinar about Roxom’s Bitcoin Line of Credit: borrowing against your Bitcoin at 7.25% APR, with no rehypothecation. If you’re interested, register here.

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We’ve discussed how we are in the Bottom Formation’s Low Consolidation phase. We will now use the strength of on-chain data, zoom in, and map current value against previous cycles.

Deep Undervaluation: Comparing On-Chain Cycle Bottoms

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During this bear market bottom formation, treasury companies are being heavily criticized, even though they have been the main source of demand. Some of the critique is fair. Digital Credit was marketed as lower volatility, yet STRC traded all the way down to $82, roughly 18% below its $100 par value.

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This is Digital Credit’s first real stress test: it’s still less than a year old, leveraged STRC positions are unwinding while Bitcoin is undergoing its bottom formation, and there is competition for liquidity from AI and IPOs.

This week, Digital Credit got declared “dead.” Bitcoin itself has been declared dead countless times, especially during the deepest parts of bear markets, when sentiment-driven fear and panic are at their peak.

👉 Key insight: it is extremely unlikely that STRC fails here. Strategy has a cash balance to pay dividends for at least 7 months, and a Bitcoin reserve to pay dividends for decades.

What Is Digital Credit?

Digital Credit is a TradFi product, preferred equity, backed by Bitcoin on the company’s balance sheet. The goal is to strip out most of Bitcoin’s volatility and convert it into income through dividend payments.

My usual work focuses on market analysis: using on-chain data to assess price, risk, and cycle positioning. In last week’s newsletter, we discussed the low consolidation phase and a bottom prediction. That newsletter remains highly relevant. If you haven’t read it yet, you can find it here:

This week, I want to discuss the forces of capital entering Bitcoin, in particular Bitcoin treasury companies and their role in the path toward a Bitcoin standard.

I’ve mentioned several times that this cycle’s main sources of demand have been ETFs and treasury companies. Both are fiat constructs, hence the critique from the community. And while some of that critique is justified, I hope to clarify how these constructs are actually a natural part of the transition toward a Bitcoin standard.

The Path Toward a Bitcoin Standard

There is a strong part of the community that thinks Bitcoin should remain a parallel system. The view is: “We’re supposed to be against the banks.” Bitcoin should be about self-custody. They are against the idea of ETFs and treasury companies, and against fiat constructs in general. Their view is that the righteous path toward a Bitcoin standard is opting out of fiat.

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But we don’t get to choose the path toward a Bitcoin standard. Bitcoin is about game theory and incentives. Whether you like treasury companies or not, they are here, and they are one of the main sources of demand for Bitcoin, especially during this bear market.

I admire the rejection of fiat constructs. We come from a system that is corrupt and has deceived us. Bitcoin is about truth and fairness.

However, one has to realize that many fiat constructs came into existence because of a real need. Banks serve a purpose in society. And even though they are able to create money out of thin air, for example through mortgages, that same mortgage is also a financial service for which there is demand.

It is absolutely no surprise to me that these services are being reinvented on Bitcoin. For example, my sponsor Roxom allows you to open a 7.25% APR credit line. But unlike an unsecured fiat loan, it is collateralized by Bitcoin, without rehypothecation.

What I am getting at is that banks are not necessarily the core problem, as these same concepts are emerging on a Bitcoin standard. The real problem is the incentives.

For over 50 years, we’ve been on a fiat standard. Because of a monopoly on money, governments have been able to gain ever more control over our lives. Fiat expands state capacity and normalizes intervention. When governments monopolize the money printer, they can fund endless bureaucracy, subsidies, enforcement, and public-private influence without asking citizens for explicit taxes. Over decades, that normalizes dependence and lets the state steer public opinion. The side effects of money printing lead to inflation, and because of inflation we need ever more intervention. It is a flywheel.

As a result, a lot of capital is trapped in decades of rules and regulation.

Bitcoin is the solution to this problem, but how does the trapped capital move into Bitcoin? You might have guessed it: through integration with the fiat system.

ETFs are one such example. Treasury companies are another.

👉 Key insight: Bitcoin is not being captured by the fiat system. It is the trojan horse.

Bitcoin’s game theory and incentives cause treasury companies to emerge, serving as a bridge for capital to flow into Bitcoin. Integration with the fiat system is important, because it helps unwind decades of trapped capital and lets it flow toward Bitcoin. The emergence of these fiat constructs, allowing people to gain a percentage-point allocation through a wealth advisor or pension fund, will contribute to a more gradual transition.

Integration with fiat will allow for a much more peaceful transition to a Bitcoin standard. The alternative is letting all that capital remain trapped and get hyperinflated, which would create a much bumpier ride toward a Bitcoin standard.

Treasury companies are called a flywheel because capital flowing into them can be converted into more Bitcoin Per Share (BPS), and rising BPS can attract even more capital.

👉 Key insight: That same flywheel is also the unwind of capital trapped in fiat.

I sincerely hope this helped clarify the dynamics behind treasury companies, and the path toward a Bitcoin standard. I always try to steelman my arguments, so if you disagree or have strong counterarguments, I’d love to read them in the comments. 👊🧡

Until next week, 🫡

-Root

We officially moved into the Low Consolidation phase. This happens when the Short-Term Holder (STH) Floor moves below the Coin Value Days Destroyed (CVDD) metric.

I discussed this in a newsletter nearly two months ago:

“The prudent approach is to turn bullish once Bitcoin breaks above, retests, and holds the STH cost basis as support. If we do break above, this could resemble a 2019 scenario. With indicators like the ISM PMI moving above 50, that scenario is not impossible. However, based on current price structure and on-chain signals, the behavior still closely resembles previous bear markets. Historically, this phase is followed by rejection at resistance and a final move into low consolidation.”

We got that rejection and the move into low consolidation, historically one of the best entry zones for Bitcoin.

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👉 Key insight: With the STH Floor moving below CVDD, CVDD takes over as the global floor. In the entire history of Bitcoin, it has only traded 18 days below CVDD.

Quick Update

Lately, I’ve been posting more regularly about Digital Credit. This is not because I want to promote the use of Digital Credit, but because there have been such bad takes about it that I felt the need to step in.

Whether you are a fan of Digital Credit or not, the truth is that it is playing a major role in the adoption of Bitcoin. I am a Bitcoin maximalist at heart, but I believe Digital Credit is a natural part of Bitcoin’s game theory and a bridge for capital to flow from an inflating dollar into a scarce asset: Bitcoin. Of course, it uses fiat structures, hence the pushback. But that is also exactly why it matters.

Understanding this game theory led me to my sponsor Roxom, who are building Bitcoin-denominated markets and the tools a Bitcoiner needs to use the fiat system to their advantage.

In a newsletter from February, I discussed how Long-Term Holder sell pressure has been a driving force of this bear market and one of the main reasons we had so much trouble pushing further than the $126k ATH.

A major reason is that the rates and ease of borrowing against your Bitcoin were underdeveloped. A quote from that newsletter:

“Borrowing against BTC remains expensive and constrained compared to traditional assets. However, with efforts to reverse policies like Choke Point 2.0 and regulatory clarity from legislation such as the Clarity Act, the foundation for more open banking access and lending infrastructure is forming.”

This week, Roxom launched a new product to borrow against your Bitcoin at 7.25%, the best rate I have seen yet, and with no rehypothecation. Like any loan, there is obviously risk involved, and I am not advocating that you should take out a loan. But having these tools available can result in less overall sell pressure from Long-Term Holders.

Low Consolidation Phase & Bottom Prediction

We’ll continue analyzing the low consolidation, CVDD’s price level, and Bitcoin’s full history, with access to the full chart. We’ll also use one of the best on-chain metrics, combined with statistical analysis, to predict Bitcoin’s bottom.

Read more

Bitcoin just made a new low. The February crash was not the bottom, mimicking previous bear market behavior.

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At Bitcoin Strategy, we have remained grounded and skeptical all the way through the recent extreme bullish sentiment. If you’ve been following the Bitcoin Strategy newsletters, you were prepared for what is playing out. Of course, a brutal crash like this is never fun, but we know we are in the phase of time capitulation, historically one of the best entry zones for Bitcoin.

This price drop surely caused frustration, after the realization that the 4-year cycle and bear market remain intact. It’s ironic to see the influencers that proclaimed we were back in a bull market now direct their anger and frustration at Saylor and Digital Credit, which has been the main source of demand in this bear market. The voices that were the loudest about being in a bull are now the loudest about Digital Credit.

I have written about how institutional flows, including treasury companies, are part of the adoption curve of Bitcoin. If you haven’t already read that newsletter, you can find it here:

I’m a Bitcoin maximalist, but I think Digital Credit will play a role in the transition to a Bitcoin standard. You can say the fiat system is garbage, and therefore all financial instruments on top of fiat are garbage. In that sense, treasury companies are also garbage. The other view is that we live in a fiat system with roughly $900 trillion of value, where everyone uses financial instruments, and treasury companies accelerate the transition of that value into Bitcoin.

The Blame of Treasury Companies

During this drop, I’ve seen some of the most ridiculous takes come by on social media. I get it, price is down and people are looking for something to blame. But the critique treasury companies received has been blown completely out of proportion.

Another 2022?

People are comparing this to the yield companies falling over in the 2022 bear market. I get the skepticism. Hearing the word ‘yield’ is an instant red flag after a 2022 bear market that was based on a cascade of opaque yield companies falling over.

But guess what, unlike 2022, transparent treasury companies have remained the main source of demand.

👉 Key insight: 2022 was opaque yield and sell pressure. 2026 is transparent yield and buy pressure. The complete opposite.

Never Sell Your Bitcoin

Strategy selling 32 Bitcoin was supposedly the trigger. This had absolutely nothing to do with the drawdown. The sale happened before the drawdown, when sentiment was still bullish, to prepare the market that a potential sell is possible when it is accretive to shareholders or for a good reason, for example during the deepest phase of a bear market.

The main reason for this sale, as I understand it, was to prove Bitcoin is liquid. Essentially, a requirement in the process of eventual S&P 500 inclusion.

👉 Key insight: Rating agencies are rating the value of Strategy’s Bitcoin at zero. The reason is that never selling Bitcoin is seen as a risk. Strategy made a small sale to prove to the agencies that Bitcoin is liquid and that they will sell if it is in the best interest of shareholders. I look at this as a requirement for S&P 500 inclusion.

Digital Credit as Medium of Exchange

You might have seen the video where Jeff Walton gets portrayed as an enemy of Bitcoin for introducing the idea of using Digital Credit as a medium of exchange. Skeptics portray Digital Credit as a shitcoin, as in: “Buy my Digital Credit instead of Bitcoin.”

The reality is that Bitcoin generally is too volatile to use as a medium of exchange, unless you use spend and replace. For that same reason, stablecoins have been much more popular than Bitcoin in countries like Argentina with high inflation. A volatile asset is simply not practical as a medium of exchange.

Eventually, when more and more capital flows into Bitcoin, its volatility will drop and it will become more practical as a medium of exchange. However, this process might take decades to unfold. Bitcoin adoption will happen first as a Store of Value (SoV), then Medium of Exchange (MoE), and lastly Unit of Account (UoA), in that order. We are currently in the SoV phase.

Digital Credit strips Bitcoin of its volatility. This is not competition for Bitcoin, it is competition for holding dollars and stablecoins.

I get it, I would also prefer to see everyone doing Bitcoin-only and self-custody. But the reality is that we live in a fiat system with lots of value locked by rules and regulation. Treasury companies provide a gateway into Bitcoin. Using fiat structures, they provide a bridge for trapped and low-volatility-seeking capital to flow into Bitcoin. Would you rather have people fund governments by buying dollars, stablecoins, and U.S. Treasuries?

The Real Reason We Continue the Bear Market

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For the past weeks, we’ve been cautiously observing the key resistance levels. While many bulls were already calling for new ATHs, we’ve remained careful and data-oriented. This week we’ll discuss what it means that Bitcoin rejected off the key resistance levels. Sentiment has been rather sour, and to be fair, it has made me more bullish.

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👉 Key Insight: This is what time capitulation feels like. Rejecting off key levels, moving through another consolidation, and waiting for the next try.

We are in this weird situation where, on the one hand, the business cycle is expanding, traditional markets are at ATHs, and Bitcoin’s correlation with risk assets is high. Yet on the other hand, Bitcoin is following the typical bear market structure we’ve seen in every 4-year cycle. Bulls are in disbelief. Over the past months, all markets performed well, except Bitcoin. Absolutely brutal.

So how does this all fit together? We’ll discuss it right here.

The 4-Year Cycle Is Dead, Long Live the 4-Year Cycle

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We have always talked about two gateways that served as the main source of demand this cycle. Both gateways were absent in previous cycles. Last week’s institutional adoption report focused on the first one: ETFs.

Last week, we discussed how institutions largely held through the most bearish phase and the drop to $60k. The number of reporting institutions even went up! If you haven’t read last week’s institutional adoption report, based on the 13F filings, you can find it here:

Since rejecting off the 200-day moving average, we’ve seen substantial outflows from ETFs, especially IBIT.

Go to ETF Tracker

Digital Credit

While the last two weeks ETFs saw poor performance, Strategy bought almost 25k BTC this week alone. Demand for Digital Credit is enormous and, unlike ETFs, especially high during bear markets. Providing an 11.5% yield is truly unprecedented, and Strategy, with its strong balance sheet, can pull this off and stomach the volatility.

I’ve been going down the Bitcoin treasury rabbit hole, which led me to my new sponsor Roxom, who are building incredible products on top of Digital Credit.

Digital Credit is a bridge that allows low-volatility capital to flow from TradFi into Bitcoin, and we are only at the beginning. It can attract capital from bank deposits, short-term treasuries, money market funds, and even equity.

Saylor found a way to generate a continuous stream of capital that can flow into Bitcoin and put upward pressure on price. During a bear market, this can have a dampening effect on the downside. His purchases alone will likely buy all new supply issuance. Think about that for a minute.

Besides the institutional adoption report covering ETFs, I am working on including Strategy. From the latest filings, we see that several pension funds have allocated to MSTR. This means passive flows into Bitcoin continue to increase.

The outlook for Bitcoin in the medium term looks incredibly bullish. Let’s now look at what the short term looks like.

Market Analysis

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Over the past years, we’ve been tracking institutional adoption. Each quarter, I’ve shared the latest Institutional ETF Holdings insights gathered from 13F filings. These filings only include institutions with over $100M in assets under management (AUM) that are required to report, and are therefore a conservative estimate.

The insights from Q1 2026 are just in!

We’ve continuously discussed how ETFs and treasury companies are the gateways for institutions and this cycle’s most important source of demand. The 13F filings are one of the best proxies for understanding these capital flows. Let’s discuss what they reveal!

Institutional ETF Holdings Q1 2026

Q1 2026 has been the most bearish quarter so far, as we saw the February drop all the way down to a Bitcoin price of $60k. The quarter started at $88,750 and ended at $68,000, a near 23.5% drop in price. Meanwhile, Institutional ETF Holdings dropped from 518k BTC to 493k BTC, a 25k BTC decrease, but less than a 5% drop.

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👇 Key insight:

• Q1 2026 is the quarter where the realization set in that Bitcoin truly entered a bear market and saw its most bearish momentum. While institutions with >$100M AUM largely held, we still saw a slight reduction of less than 5% in holdings.

• We can conclude that institutions were net sellers, though they largely held through the bear market.

Institutional Share of ETF Holdings

The percentage of total U.S. Bitcoin ETF holdings owned by institutions declined by nearly two percentage points.

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👇 Key insight:

• Q1 2026 saw a slight decline in the institutional share of ETF holdings.

• Interestingly, total ETF holdings over the entire quarter remained roughly the same.

• This means demand from retail and non-reporting allocators exceeded that of large institutions.

Large capital allocators still hold nearly 38% of total ETF holdings.

Number of Institutions

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👉 Key insight: The most bullish figure from the filings is that during this bear market, and despite the most bearish momentum, the number of institutions reporting Bitcoin holdings increased from 1,975 to 2,003.

New Institutions

While most new firms entering the space are investment managers and hedge funds, and not especially headline-worthy, there are a couple of undeniably bullish developments.

Scotia Bank, one of Canada’s largest banks, is a first-time allocator! Their position isn’t that large, only 121 BTC, around $8 million at the time of purchase.

Mubadala Investment Co, the Abu Dhabi state-owned sovereign wealth fund, increased its position by 1,083 BTC. And a second Abu Dhabi sovereign entity, Abu Dhabi Investment Council (ADIC), which operates under the Mubadala umbrella, now also disclosed a 4,628 BTC allocation. Abu Dhabi sovereign wealth funds continue increasing their exposure to Bitcoin ETFs during this bear market, an incredibly bullish development.

Top 25 Largest ETF Holders

Below are the top 25 largest institutional Bitcoin ETF holders.

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👉 Key insight: 16 out of 25 (64%) increased their positions in Q1, including BlackRock, major banks, and the state-owned sovereign wealth funds of Abu Dhabi.

To Conclude

The most important takeaway from this data is that, while institutions largely held, unlike the bull market, demand during this bear market has still been substantially retail-driven. We’ve discussed many times how in comparison to previous cycles, this has been the least retail driven cycle, but this report shows during this bear market retail has been dominating. This report is specifically about institutional ETF holdings. Another source of demand during this bear market has been treasury companies, in particular through digital credit in the form of STRC. Note that demand for products like STRC is also estimated to be 70%–80% retail.

Over the past weeks, we’ve witnessed the rally toward key resistance levels like the STH cost basis, where price currently still finds itself.

While the short-term dynamics are mixed, it’s undeniable that institutional adoption will continue to grow immensely. Even during a bear market, the number of reporting institutions is growing. This shows we are still at the beginning of these gateways, and additionally we have developments around Digital Credit, which are truly incredible!

In the medium to long term, this is an incredibly bullish development. However, in the short term, institutions were still net sellers. This validates having a conservative approach toward the current bullish sentiment and rally.

Again, I am open to a continuation of the bull market depending on how price responds to the current resistance levels, but we haven’t broken entirely through resistance yet. I still think there is a chance of rejecting off these levels and seeing low consolidation for a couple more months.

In the worst case, the next couple of months might show poor performance, but the underlying developments for Bitcoin to grow are here.

Together, we’ll continue to track the institutional and on-chain data, and how Bitcoin performs in the short term.

I am also looking forward to the Q2 data, which should include allocations to the Morgan Stanley ETF. Note that there is a 45-day reporting window, so the next results will only become available by mid-July. I’ll keep you updated! 👊🫡

As always, your thoughts are appreciated. 🧡

-Root

Bitcoin broke above the STH cost basis, a level we’ve been tracking closely over the past weeks. This is a constructive development. However, Bitcoin is still below the 200-day moving average, which means we are not fully through the resistance zone yet.

Many are already celebrating the breakout, but the real test is whether this zone can turn into support. The prudent approach remains the same: we want to see Bitcoin break above resistance, retest it, and hold it as support before becoming fully bullish.

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👉 Key insight: Bitcoin broke above the STH cost basis, but remains below the 200-day moving average. We are still inside the broader resistance zone. The next important step is for this zone to turn into support.

If Bitcoin manages to stay above the STH cost basis and eventually reclaim the 200-day moving average, the bull case becomes much stronger. If not, this move could still turn into another rejection within the broader bear market structure. For now, the market is showing strength!

Two possible catalysts could help keep that strength going: pro-bitcoin Kevin Warsh may soon replace Jerome Powell as Fed Chair when Powell’s term ends next week, and the CLARITY Act is moving forward in the Senate next week, which could bring clearer rules for the industry.

New Sponsorship: Roxom

I’m excited to announce I’m officially sponsored by Roxom.

Over the past year, I’ve been on Roxom TV several times. I met the Roxom team, got to know what they are building, and it became clear that our goals are very much aligned. Roxom is a Bitcoin-only company building Bitcoin capital markets.

In my last newsletter, I explained how institutional flows are a natural part of Bitcoin’s adoption curve. ETFs, treasury companies, digital credit products, and Bitcoin-denominated markets are all part of this transition. Roxom’s mission fits perfectly with how I believe we’ll transition into a Bitcoin-denominated world.

They are creating a Bitcoin-denominated capital market, where financial products are priced, denominated, and settled in Bitcoin! This includes products like Bitcoin-denominated futures, stocks in Bitcoin, and digital credit instruments that can pay income in BTC.

From today moving forward, my charts will include the Roxom logo.

If you haven’t created an account with Roxom yet, and want to see what markets denominated in Bitcoin look like, consider doing so today.

Click here or use code: ROOT.

Of course, only use products that are available in your jurisdiction and always understand the risks involved.

Why This Fits Bitcoin Strategy

This sponsorship is not random. We’ve been tracking Bitcoin’s market structure, on-chain and cycle behavior, and the broader transition toward institutional flows. Roxom is building into that same future.

We’ve talked a lot about how this cycle is different in that retail has been less dominant. Institutional flows have become more important. Treasury companies are creating new products. ETFs opened the door. Digital credit is emerging. Bitcoin capital markets are forming.

This is the natural next step of Bitcoin adoption. Early adopters bought Bitcoin directly. The early majority will come through financial products, platforms, advisors, ETFs, treasury companies, and Bitcoin-denominated markets.

I highly value the Bitcoin ethos, self-custody, and running a node. With Bitcoin on its way to becoming the global reserve asset, we also need Bitcoin-denominated markets and lending that allow people and institutions to operate on a Bitcoin standard.

Wrap-Up

I’m excited to start this new partnership with Roxom. They are building products for the next phase of Bitcoin adoption, and I’m grateful to have them as a sponsor! 🙏 ✊

I also want to sincerely thank my previous sponsor, BTC Direct, for years of trust and support. We are parting on excellent terms, and I wish them all the best moving forward. 🧡

As always, let me know what you think in the comments. 👊

Until next week, 🫡

-Root

The make-or-break moment for Bitcoin continues. Over the past week, Bitcoin has been sitting right below the STH cost basis (live chart available). We’ve been covering this level in the past two newsletters, which you can find here.

Bitcoin Las Vegas

The Bitcoin conference, taking place in the pinnacle of fiat culture, Las Vegas, was truly amazing. Speakers like SEC Chair Paul Atkins, FBI Director Kash Patel, and Eric Trump talking about Bitcoin would have been unthinkable only a few years ago.

This conference was a great mix of Bitcoin developers and institutional players. Bitcoin is for everyone. That also includes politicians and the FBI director. Powerful people having an interest in Bitcoin shows that Bitcoin is winning and is on its path toward hyperbitcoinization. I’ll explain further below why we should welcome politicians and institutions.

Is This the Bitcoin Supercycle or Is the Four-Year Pattern Still Intact?

I had a panel with Michael Terpin, Matt Crosby, and Shyan Hussain on the Enterprise stage about Bitcoin’s super/four-year cycle. It was recorded and should become available on the Bitcoin Magazine channel.

The general consensus of the panel was that Bitcoin has not yet broken out of the 4-year cycle. It should be bottoming within the next six months at most. And if there ever was a time for things to be different, it would be this time, as there have been structural differences regarding institutional flows compared to previous cycles.

An important point I made, but didn’t get to explain in full detail during the panel, is about what these institutional flows represent and the adoption curve of Bitcoin.

The adoption curve of a new technology starts with the innovators & early adopters, followed by the early majority and late majority.

Within Bitcoin, the early adopters are the people with a sufficiently open mind to understand its value proposition and the willingness to do the proof of work. These people have been coming in over the past cycles.

In each cycle, from 2011, 2013, 2017, and 2021, we saw a new influx of early adopters and experienced hype-driven retail cycles. The 2025 cycle, however, has been the least retail-driven cycle and has been much more about institutional flows.

What changed?

The cohort of early adopters has become saturated. The early adopters who were willing to do the work are already in Bitcoin. They had 15 years to front-run institutions. They had four hype-driven cycles to hear about Bitcoin. The majority of people, as displayed in the chart above, do not fall into the early adopter category.

So how does the majority of people come into the space?

You might have guessed it: through institutional flows.

Bitcoin is 17 years old, but the institutional gateways have only existed for two years. These gateways are ETFs and treasury companies.

The early majority does not have the time and mindspace to learn about Bitcoin. They get an allocation because their financial adviser recommends one. They come in because their pension fund starts allocating to Bitcoin, as advised by institutions like BlackRock.

We are currently only two years into institutional gateways being available, and this is the beginning of the early majority coming to Bitcoin. They would not come if it wasn’t for these institutional flows.

There will always be some retail adoption each cycle, but we are past the early adopter phase. Instead of full retail-driven cycles we’ll continue with much more structural institutional flows.

Wrap-Up

I hope you now understand why we need to welcome institutional flows, and why having politicians and the FBI director speak at a Bitcoin conference matters. They help create clear rules and regulations, like the CLARITY Act and MiCA, which are needed to pull in the majority.

Let me know what you think in the comments section. 👊 🧡

Until next week! 🫡

-Root

The make-or-break moment for Bitcoin continues. Sentiment is extremely bullish, yet the reality is that Bitcoin is still sitting right below the STH cost basis. Still, there are valid reasons why Bitcoin could push through:

• Unprecedented demand from STRC

• Negative funding rate

• ETF inflows, especially IBIT

Bullish sentiment might make you believe a breakout is a given. However, this rally faced little resistance and was mainly about filling the supply gap. The real resistance starts at the STH cost basis.

If you haven’t read last week’s newsletter, it remains highly relevant.

Reject or Break Through?

Live chart freely available:

Go to live chart

Reject or break through, that is the question. I’ve discussed many times how this past bull market was different, with much more structural institutional demand. It has been the least retail-driven cycle, and therefore we’ve had a very distributed top.

The same applies to the bear market. Structural demand has continued, ‘crypto’ is out of the picture, and there is much less degeneracy. It is therefore much more probable we won’t reach the deep undervalued levels seen in previous cycles.

That doesn’t mean the bear market is over. It means that if Bitcoin rejects here, we are more likely to see another phase of sideways chop rather than a long period below the Realized Price.

Structural Demand

We continue to see structural demand for Bitcoin. Treasury companies, specifically products like STRC, and ETF flows are of major importance. These gateways literally did not exist in previous cycles and are now the main source of demand!

In the coming months, we’ll start focusing more on products like STRC and its derivatives.

ETF Tracker Update

The other source of demand, and of major importance, are ETFs. Therefore this week the ETF Tracker got an update. Morgan Stanley has been added!

Over the past months, data for some ETFs was not updating correctly in real time. All these issues have now been resolved.

Go to ETF Tracker

Moving Forward

Together, we’ll closely track how Bitcoin responds to the STH cost basis. If it rejects, we have a pretty decent picture of how things could play out. Just read the newsletters from the past month.

If Bitcoin is able to break through resistance and turn it into support, we’ll have to take a more bullish stance. It would signify a new era for Bitcoin, breaking away from the 4-year cycle.

I shared the reasons why this might happen, and honestly, that would be exciting to see play out. But I do not want to be prematurely bullish. The resistance is real, so let’s first observe how Bitcoin responds.

Announcement

Exciting changes are on the way, I’ll share more in the coming weeks.

I’ll also be at Bitcoin Las Vegas next week. If you’re going to be there, send me a DM!

I hope you enjoy the ETF Tracker update and found these insights useful. As always, let me know what you think in the comments. 👊 🧡

Until next week! 🫡

-Root