Bitcoin is currently ‘in the midst of a bull run’ – Gray’s report
Historical Bitcoin (BTC) market cycle indicators show that the crypto market is “currently in the midst of a bull run” supported by a mix of strong fundamentals and technical factors, according to a recent report from Greyscale.
It is not easy to recognize the start of crypto bulls except for the fact that the price of BTC usually rises within 8-11 months after the supply of Bitcoin is halved. Gray Analysts has set out in a recent report to outline the key elements of a bull market.
These factors are divided into precursors and the “fifth inning”, showing where the market is currently.
Precursors of the crypto bull run
According to the report, crypto bull markets have already started to increase due to the dominance of Bitcoin.
“This trend underscores Bitcoin's role as a leading indicator for the broader crypto market,” the report added. Typically, a rally in altcoins is preceded by a rise in the price of BTC, with investors “seeking cryptocurrencies at higher risk” with their Bitcoin profits.
According to Grayscale analyst Michael Zhao
“This volatility was seen during the bull run of 2021-2022, which was quickly followed by Bitcoin's gains, which saw a significant increase in altcoin prices.”
BTC's rising dominance has shown a “recognizable pattern” that could pave the way for a rally in altcoins, after analysts at Greyscale analyzed Bitcoin's market value.
However, three specific incentives distinguish this cycle from previous ones: spot Bitcoin ETF inflows, positive stablecoin inflows and a reduction in BTC balance exchanges.
“The first critical difference in this bull market compared to previous ones is the rapid turnaround in positive market dynamics, which largely affects spot Bitcoin ETF earnings,” Grayscale said. Since their approval on January 10, capital inflows into spot Bitcoin ETFs have consistently outpaced BTC, “more than 3 times since mid-March, putting significant pressure on prices,” the report added.
Other catalysts for the recent BTC price breach, which saw it breach the all-time highs of March 5, are healthy on-chain fundamentals, including stable coin supply on exchanges.
The stablecoin supply change chart shows stablecoin liquidity has increased, indicating that more capital is available for trading, mainly to buy cryptocurrencies.
“This inflow of stablecoin capital, the increase in stablecoin reserves on exchanges, will add momentum to the bull market.”
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In addition to increasing buying demand, the lack of selling demand backed by reduced exchange supply is a key factor supporting Bitcoin's rally, as stable coin supply is assured.
Additional data from Glassnode shows that the total number of BTC held in popular exchange wallets has decreased to about 12% of the total supply, which “reached the lowest level in five years.”
In addition, Grayscale reports a significant decline in bitcoin traded on exchanges “down 7% since the peak of bitcoin supply in May 2023.” This partially space-driven Bitcoin ETF reflects a supply squeeze that moves BTC into custodial cold wallets for long-term storage as investors anticipate future price growth.
Is there a bull market here?
After understanding the factors that have driven Bitcoin's price so far, it's important to determine where the market is right now. Grayscale uses a baseball analogy, “Right now we're exploring the ‘middle stage' or ‘fifth inning' of the bullpen.”
Using Net Unrealized Profit/Loss (NUPL) – a metric that calculates the profit/loss by dividing the difference between the market price and the realized value by the market value, you define the ratio of NUPL as the BTC price increases. This means that investors who bought the property at a low price are still “hanging on to their coins” as the price rises.
In the year Since mid-March 2024, NUPL has reached a historical high of approximately 60% and over 70% profit margin, it seems that we are approaching a peak cycle in this measure.
Bull markets are typically driven by excitement, fear of missing out (FOMO) and speculative trading from retail investors. One way to determine this is by analyzing the sentiment of the retail market.
Grayscale analysts looked at data from Satiment, which found that retail investor demand is still well below levels seen during the 2021 bull market.
In addition, data from Google Trends shows that interest levels for the word “crypto” are below 40, which is much lower than the high levels seen in 2021 at 99.
This suggests that “the public's curiosity about cryptocurrency may not fully recover,” the report says.
This raises the question of whether retail investors are participating in the current cycle.
“It's fair to assume that retail investors who scrambled last cycle to match rising price/chain metrics with weaker retail sentiment haven't fully entered the market.”
However, according to data from Alternatives, a platform that analyzes “sentiment and sentiment” around cryptocurrencies, the market sentiment is similar to that seen at the peak of the 2021 bull market, with BTC increasing its previous all-time high of $69,000.
This could signal the return of retail traders to the crypto market, and the associated greed and FOMO is expected to drive prices higher.
After considering these technicals and fundamentals, Grayscale concludes, “The bull run will continue.” The firm, however, advises investors to carefully monitor market shifts in spot Bitcoin ETFs and other macroeconomic factors.
Zhao says
“Despite progress, we believe there is still room to run.”
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
