Written by: Matt Crosby.
Compiled by: Luffy, ForesightNews
As Bitcoin enters a price discovery mode once again, participants in the cryptocurrency market are curious: has retail FOMO begun? Will we see the influx of retail investors that we witnessed during the last bull market cycle? We will study the current state of the Bitcoin market and the potential near-term outlook using active addresses, historical cycles, and various market indicators.
Rising retail interest.
One of the most direct signs of retail interest is the number of newly created Bitcoin addresses. Historically, a sharp increase in new addresses often marks the beginning of a bull market as new retail investors enter the market. However, in recent months, the growth of new addresses has not been as rapid as expected. Last year, we saw around 791,000 new addresses created in a single day, indicating strong retail interest. In contrast, while there has been a slight increase in the current number of new addresses, we are still lingering at lower levels.
Figure 1: The number of new addresses on the Bitcoin network has started to rise.
Google Trends also reflects this interest. Although the search volume for 'Bitcoin' has been increasing over the past month, it remains far below the peaks of 2021 and 2017. Retail investors seem to show newfound curiosity, but have not yet reached the frenzied excitement of FOMO.
Figure 2: The search volume for 'Bitcoin' on Google is also rising, but remains relatively low.
Changes in holders.
We are witnessing a shift of Bitcoin from long-term holders to newer short-term holders. This change in supply may suggest the beginning of a new market phase, as experienced holders start to realize profits and sell to newer market participants. However, the total amount of Bitcoin being transferred remains relatively low, indicating that long-term holders have not yet begun to sell off their Bitcoin in large quantities.
Figure 3: The number of Bitcoin transferred to new holders has only seen a slight increase.
Historically, during the previous bull market from 2020 to 2021, we saw a significant flow of funds from long-term holders to new investors, driving the subsequent price increases. Currently, this transfer is not evident, despite the price rising, as long-term holders choose to continue holding their Bitcoin. This reluctance to sell indicates that holders are confident in the potential for further increases.
Spot-driven rally.
A key factor in Bitcoin's latest rally is that it is driven by spot trading, contrasting sharply with previous bull markets that relied on leveraged positions. The open interest in Bitcoin derivatives has only seen a slight increase, starkly contrasting with previous peaks. For instance, prior to the FTX collapse in 2022, the open interest was quite substantial. A spot-driven market does not have excessive leverage, making it more stable and resilient, as there are fewer investors facing the risk of forced liquidation.
Figure 4: Open interest has been declining over the long term, with only a slight increase recently.
Whales are accumulating.
Interestingly, while the number of retail addresses has not significantly increased, the number of 'whale' addresses holding over 100 BTC has been steadily rising. In recent weeks, wallets holding large amounts of BTC have increased by tens of thousands, worth billions of dollars. This indicates that even as Bitcoin reaches historical highs, whale investors remain confident in the current price levels.
Figure 5: The number of addresses holding at least 100 BTC has reached its highest level since 2019.
During past bull market cycles, we have seen whales exit or reduce their positions around market peaks, but this time we have not observed such behavior. The accumulation by experienced holders is a strong bullish signal as it indicates confidence in the long-term potential of the market.
Conclusion.
Although Bitcoin's rise to historical highs has rekindled interest, we have yet to see signs of retail FOMO. This suggests that we may just be at the beginning stages of this bull market. Long-term holders remain confident, whales are accumulating Bitcoin, and leverage remains moderate, all of which indicate a healthy market and that the uptrend may continue.
As we continue to enter the bull market cycle, the market structure suggests that a larger surge driven by retail could still occur in the future. At that time, Bitcoin is likely to be pushed to new heights.
