Source: CryptoVizArt, UkuriaOC, Glassnode; Translated by Deng Tong, Golden Finance
Summary
This article discusses the recent surge in Bitcoin reaching new all-time highs and analyzes the factors driving this momentum, particularly the strong demand for spot markets relative to perpetual futures.
We analyzed the impact of the recent U.S. elections on institutional capital inflows, highlighting how spot holding strategies have become increasingly popular, leading to a surge in U.S. spot ETFs and CME futures open interest.
An assessment of the ATH discovery phase, focusing on the percentage of supply in profit and the market dynamics that accompany profitability exceeding 95% over the long term.
We conducted an in-depth study of on-chain cost basis Bollinger Bands to track demand momentum, illustrating how proximity to these bands indicates periods of strong market demand.
Finally, we examined realized profit levels, noting significant profit-taking activity, but indicating that current levels still remain below previous ATH peak levels, suggesting room for further growth.
Surge after the election
After the results of the U.S. presidential election were announced, it was widely believed that the Trump administration would take a more crypto-friendly stance, sending positive signals in the cryptocurrency market and driving Bitcoin to new all-time highs.
This chart shows the retracement of Bitcoin (BTC) against various fiat currencies and gold (XAU) from ATH. Notably, BTC:TRY (Turkish Lira) first reached ATH on June 26, 2024, ahead of other pairs. On November 6, 2024, almost all BTC forex pairs set new highs, except for BTC:Gold.
Historically, U.S. presidential elections have had a significant effect on Bitcoin's market performance, with both price and actual market capitalization (representing cumulative wealth invested in the Bitcoin network) experiencing substantial changes.
2016 Election (Republican administration):
Capital realized before the election surged by 20.3%, followed by a 55.5% increase after the election.
Prices increased by 34.7% before the election and soared by 124.6% in the months following the election.
2020 Election (Democratic administration):
Pre-election actual capital inflow increased by 16.5%, and post-election it surged by 196.3%.
Prices increased by 35.4% before the election and surged by 306.8% after the election.
2024 Election (Republican administration, to date):
Capital realized before the election grew by 13.3%, with a slight increase of 2% after the election.
Prices increased by 10.1% before the election and have risen by 27.9% after the election (so far).
Thus, the current cycle reflects a milder response before previous elections, although still very optimistic. The market is currently adapting to potential changes in crypto policy that may occur in the coming years.
Bitcoin has continued its recent momentum of reaching new all-time highs, achieving the largest weekly movement ever, with an increase of up to $116,000. This rebound greatly exceeded historical weekly movements, nearly five times the statistical upper limit (1 standard deviation), indicating unprecedented bullish momentum.
This unusual price movement reflects market optimism, with participants viewing the expected regulatory environment as a catalyst for continued capital inflows.
Spot-driven breakout
This chart highlights the daily cumulative trading volume increment (CVD) of the Coinbase spot market, showing significant increases in buying pressure. Recently, daily spot CVD reached $143 million, approaching the previous high of $152 million set on March 13.
Since July, every Bitcoin rise has been accompanied by strong growth in buyer interest on Coinbase, indicating robust demand in the spot market from one of the largest exchanges in the U.S. This sustained interest from investors suggests that market participants are increasingly optimistic about digital assets and reinforces the current spot-driven nature of the rally.
Following strong buying pressure in the Coinbase spot market, the recent rebound has also seen significant capital inflow into U.S. spot ETFs, with assets under management increasing by $6.8 billion over the past 30 days. This growth exceeded the $7.6 billion increase in CME futures open interest, indicating a clear preference among investors for spot investments through ETFs.
The correlation between ETF inflows and CME open interest highlights the dominance of spot holding strategies. However, stronger ETF demand underscores a shift by investors towards direct spot investments during this market rally.
Typically, sustained demand momentum in the spot market is accompanied by similar positive momentum in perpetual contract futures. The recent peak in perpetual contract market premiums—reaching $1.59 million per hour on November 12 (with a 7-day average of $392,000 per hour)—reflects strong speculative demand.
However, this level remains below the mid-March peak, reinforcing the hypothesis that the current rebound is more spot-driven. The moderate yet significant demand in the perpetual contract market highlights that spot demand, rather than leveraged speculation, is the primary force behind the price surge thus far.
Price discovery phase
Bitcoin has entered a new price discovery phase, with all circulating supply beginning to show profits. This chart displays the percentage of profitable supply and the number of consecutive days of profits exceeding 95% per month.
Historically, these euphoric phases have lasted about 22 days before adjustments occur, pushing over 5% of the supply below the original acquisition price. The current rebound has maintained this high-profit level for 12 consecutive days, highlighting strong market sentiment but also suggesting that based on past patterns, future adjustments may occur.
This chart examines the cumulative realized profits during the new ATH discovery phase, highlighting the scale of profit-taking activity. Historically, realized profits of $30 billion to $50 billion per month before demand exhaustion have typically signaled a cooling period.
Currently, since entering the latest ATH discovery phase, we have observed realized profits of $20.4 billion. Although the scale of profit-taking is substantial, it remains below historical peaks, indicating that there is still room for further increases before reaching potential demand exhaustion.
Discovery phase swing
As we enter a new ATH discovery phase, it becomes crucial to determine the most effective pricing models to respond to this heightened market activity. This chart shows the cost basis of new investors along with the statistical upper and lower limits (±1 standard deviation).
In the ATH discovery phase, as new investors enter at higher prices, Bitcoin's price typically approaches and tests the upper limits multiple times, driven by strong demand momentum. Currently, Bitcoin's price is $879,000, slightly below the upper limit of $949,000. Monitoring the proximity of these swings, especially the upper and mid-limits, can highlight periods of strong market demand, reflecting enthusiasm for new capital entering the market during the rebound phase.
Currently, the spot price of Bitcoin is $879,000, below the upper limit of $949,000. Monitoring the proximity of these swings, particularly the upper and middle swings, can highlight when strong demand may be slowing and when prices may be high enough for many existing holders to increase selling pressure.
Currently, the realized profit amount averages about $1.56 billion/day, with long-term holders contributing $720 million, accounting for 46% of the total.
Despite increased profit-taking activity, the total realized profits are about half of what was recorded during previous cyclical ATH periods (breaking $3 billion/day, with over 50% attributed to long-term holders). This again suggests that if demand continues to flow in, there may still be room for further increases, and more selling pressure is needed before reaching typical profit realization peak levels.
Conclusion
This article analyzes the recent historical peaks of Bitcoin, primarily driven by strong demand in the spot market, mainly through U.S. spot ETFs. After the election, interest from institutional investors surged, with significant capital flowing into CME futures and ETFs, benefiting spot exposure and driving Bitcoin into a new ATH discovery phase. Currently, over 95% of circulating supply is in profit, which typically leads to significant profit-taking.
Currently, almost all of the BTC circulating supply is in profit, despite a significant increase in profit-taking activity. While actual profits for both short-term and long-term holders have increased, they still remain below previous peak levels, which may indicate that many investors are willing to wait for higher prices.
