A new report obtained from the institutional unit of the crypto exchange Coinbase, prepared in collaboration with the crypto intelligence firm Glassnode, shows that despite the period of consolidation in the second quarter of 2024, the cryptocurrency market is strong and continues to grow.
The second quarter reflected price consolidation, with prime asset prices remaining within a relatively tight price window, the report said. Compared to the meteoric rise in the first quarter, this shows market volatility. even so, Broad market indicators point to continued health and potential for future growth.
“The price adjustment in the second quarter is a healthy and natural part of the current market cycle,” the report said.
This outlook is supported by strong trading volumes in the spot and derivatives markets, a steady flow of new investors and progress on the regulatory front.
“Looking beyond simple price movements reveals a very healthy crypto landscape,” the report added.
In addition, the report sheds light on the increasing activity on the chain, especially on the Ethereum network and layer-2 solutions.
Average daily addresses in Ethereum and leading Layer-2 have risen by 127% this year, the report said, driven by activity in these scalable solutions. Transactions in the Ethereum ecosystem grew 59 percent in Q2, though most of that growth came from layer-2 scrounging networks.
This surge in activity highlights the use cases for Ethereum from decentralized finance (DeFi) to NFTs and beyond. Diversification of investor interest and growth in activity across the chain are promising signs of a healthy market.
“We're still in the middle of development because it's attracting attention in the space,” says Duong.
Image: Coinbase Institutional/Glassnode
An important aspect of understanding the health of the market is monitoring the market value to actual value (MVRV) ratio. The MVRV ratio helps measure market sentiment by comparing market value with perceived value.
“Periods where MVRV trades above its 365-day moving average usually coincide with strong uptrends,” said James Check, lead analyst at Glassnode.
This measure is important for identifying whether the market is overheated or undervalued, providing information about investor profitability and market corrections. One of the key highlights of the report is the decline in correlation between crypto assets during the second quarter. The trend suggests that the crypto market is growing, the report said.
Image: Coinbase Institutional/Glassnode
David Dung, Head of Institutional Research at Coinbase, said, “This decoupling strengthens the case for crypto ownership, which is a way to systematically diversify one's portfolio.”
Edited by Ryan Ozawa
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