Original title: Riding the Liquidity Tide
Original authors: CryptoVizArt, UkuriaOC, Glassnode
Original text translated by: Bai Shui, Golden Finance
Abstract
· Strong capital inflows into ETFs and the spot market propelled Bitcoin to $93,000. Over the past 30 days, more than $62.9 billion has entered the market, with BTC dominating demand inflows.
· The increase in unrealized profits among long-term holders triggered large-scale spending activity, with 128,000 Bitcoins sold from October 8 to November 13.
· US spot ETFs played a critical role, absorbing about 90% of the sell-off pressure from long-term holders during the analysis period. This highlights the growing importance of ETFs in maintaining liquidity and stabilizing the market.
Surge in capital inflows
Since early November, Bitcoin's price performance has been outstanding, consistently forming new ATH throughout the month. When comparing the price performance of the current cycle with those from 2015-2018 (blue) and 2018-2022 (green), a remarkable and sustained similarity can be observed. Despite significant differences in market conditions, the extent and duration of the rebounds are surprisingly consistent.
This cross-cycle long-term consistency remains interesting, providing insights into Bitcoin's macro price behavior and the cyclical market structure.
Historically, past bull markets have lasted between 4 to 11 months starting from the current point, providing a historical framework for assessing cycle durations and momentum.
This week, a new ATH was set at $93,200, bringing Bitcoin's quarterly performance to an impressive +61.3%. This significantly outperforms the relative performance of gold and silver, which saw quarterly gains of +5.3% and +8.0%, respectively.
This stark contrast suggests that capital may shift from traditional value assets and commodity storage to Bitcoin as a younger, emerging, and digital asset.
Bitcoin's market cap has also expanded to an astonishing $1.796 trillion, making it the seventh-largest asset in the world. This move places Bitcoin above two globally significant assets: silver valued at $1.763 trillion and Saudi Aramco valued at $1.791 trillion.
As of now, Bitcoin is only 20% behind Amazon, making it the next significant milestone in its ascent among the world's most valuable assets.
After an outstanding 90-day performance by Bitcoin, the broader digital asset market began experiencing a significant influx of funds. Over the past 30 days, total inflows reached $62.9 billion, with Bitcoin and Ethereum networks absorbing $53.3 billion, while the supply of stablecoins increased by $9.6 billion.
This is the highest level since peaking in March 2024, reflecting a recovery in confidence and new demand after the US presidential election.
Expanding the observed capital inflows, the vast majority of the $9.7 billion in stablecoins minted over the past 30 days has been directly deployed to centralized exchanges. This inflow is closely related to the total capital flow of stablecoin assets during the same period, underscoring its critical role in stimulating market activity.
The surge in exchange stablecoin balances reflects strong speculative demand from investors capitalizing on the trend, further reinforcing the bullish narrative and post-election momentum.
Surveying investor profitability
So far, we have explored the trend of rising market liquidity, which supports Bitcoin's outstanding performance. In the next section, we will use the MVRV ratio to evaluate how this price behavior affects the unrealized profitability (paper gains) of market investors.
When comparing the current value of the MVRV ratio (Orange) with its annual moving average (Blue), we can see an accelerated increase in investor profitability. This phenomenon typically supports a sustained momentum in the market, but it also creates conditions where investors are more likely to start taking profits to realize paper gains.
As market investor profitability improves, the potential for new selling pressure increases. By overlaying the MVRV ratio with a ±1 standard deviation band, we can construct a framework to assess overheating and overbought market conditions.
· Overheated (Warm Colors): MVRV trades above +1SD
· Underheated (Cool Colors): MVRV trades below -1SD
Bitcoin's price recently broke through the +1σ range, which is $89,500. This indicates that investors currently hold statistically significant unrealized profits and suggests an increased likelihood of profit-taking activity.
However, historically the market has remained in this overheated state for extended periods, especially under the support of sufficiently large capital inflows to absorb selling pressure.
Extreme spending by long-term holders
During the booming phase of market cycles, the behavior of long-term investors becomes crucial. LTH controls a significant portion of the supply, and their spending dynamics can vastly influence market stability, ultimately forming local and global tops.
We can utilize the NUPL metric to assess the unrealized profits held by long-term holders, currently at 0.72, slightly below the threshold of belief (Green) to excitement (Blue) at 0.75. Despite significant price increases, the sentiment of these investors remains lower compared to previous cycle peaks, indicating there may still be room for further growth.
As Bitcoin broke through $75,600, the 14 million Bitcoin held by long-term holders fully converted to profits, stimulating accelerated expenditures. Since the ATH breakthrough, this has led to a balance decline of +200k BTC.
This is a classic and recurring pattern; as long as the price trend remains strong and demand is sufficient to absorb profits, long-term holders begin to take profits. Since LTH still holds a large amount of Bitcoin, many LTH are likely waiting for higher prices before releasing more Bitcoin back into liquid circulation.
We can use a binary indicator of long-term holder spending to assess the intensity of LTH selling pressure. This tool evaluates the percentage of days over the past two weeks that the group spent more than its accumulation, leading to a net decline in their holdings.
Since early September, as Bitcoin's price has risen, expenditures from long-term holders have steadily increased. With the recent surge to $93,000, this metric reached a value indicating that LTH balances declined on 11 out of the past 15 days.
This highlights the increasing distribution pressure from long-term holders, although it has not yet reached the levels observed around the peaks in March 2021 and March 2024.
After identifying the increased spending behavior of long-term holders, we can refer to the next tool to gain deeper insights into their activities around key market points. The interplay of profit-taking and unrealized profits helps highlight their role in shaping cycle transitions.
The chart visually shows:
· LTH realized price (Blue): The average acquisition price of long-term holders.
· Profit/Loss Pricing Range (Blue): Represents the range of extreme profits (+150%, +350%) and losses (-25%) levels, which typically trigger significant spending activity.
· Profit-taking (Green): Long-term holders are in a phase of holding over 350% profit and increasing their expenditures.
· Sell-off (Red): Long-term holders are in a high expenditure period experiencing losses of -25%+.
Bitcoin's price has soared into the over 350% profit range (at $87,000), prompting significant profit-taking behavior from this group. As the market rises, distribution pressure may increase, and these unrealized gains will correspondingly expand. This historically marks the beginning of the most extreme phases of previous bull markets, where unrealized profits grew to over 800% during the 2021 cycle.
Institutional buyers
We will now turn our attention to the role of institutional buyers in the market, particularly through US spot ETFs. In recent weeks, ETFs have been a primary source of demand, absorbing most of the selling pressure from LTH. This dynamic also highlights the increasing influence of institutional demand in shaping the modern Bitcoin market structure.
Since mid-October, weekly ETF inflows have surged to between $1 billion and $2 billion. This represents a significant rise in institutional demand and is one of the most notable periods of fund inflows to date.
To visualize the balance of LTH sell-off pressure and ETF demand, we can analyze the 30-day changes in Bitcoin balances for each group.
The chart below shows that from October 8 to November 13, ETFs absorbed approximately 128,000 BTC, accounting for about 93% of the 137,000 BTC net sell-off pressure applied by LTH. This highlights the critical role of ETFs in stabilizing the market during increased sell-off activity.
However, since November 13, LTH selling pressure has started to exceed ETF net inflows, echoing the pattern observed in late February 2024, when supply-demand imbalances led to increased market volatility and consolidation.
Summary
Bitcoin's rise to $93,000 is supported by strong capital inflows, with approximately $62.9 billion worth of capital flowing into the digital asset space over the past 30 days. This demand has been led by institutional investors through US spot ETFs, even as capital flows out of gold and silver.
ETFs played a key role, absorbing over 90% of the selling pressure from long-term holders. However, as unrealized profits reach more extreme levels, we can expect LTH expenditures to increase, and their inflows to exceed ETF inflows in the short term.
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