Bitcoin (BTC) continues to consolidate around the $100,000 mark, but its actual market capitalization suggests that the market is a long way from entering a euphoric rally. Although it reached $104,576 after recovering from last week's dip below $100,000, BTC's actual market capitalization growth remains slower than in previous cycles. This gradual increase aligns more with the early stages of previous market cycles rather than the parabolic phases typically associated with market peaks.
Actual market capitalization signals gradual growth
One of the key indicators of the market cycle is actual market capitalization, which measures the total value of BTC based on the price of each coin when it was last moved rather than the current market price. Historically, during euphoric rallies, this metric undergoes a rapid surge, often increasing nearly vertically, sometimes rising up to 5.7 times from its cycle low. However, in the current market cycle, which began in January 2023, actual market capitalization has only increased by 2.1 times.
This gradual increase reflects the 2015-2018 cycle, indicating that BTC still has significant upside potential before reaching the peak of the rally. The actual price, another metric derived from actual market capitalization, is currently at $42,000, up from $20,000 in 2022. Many long-term holders purchased BTC at much lower prices, which helps keep the actual price relatively low compared to the current market price.
BTC as a long-term reserve asset
Unlike previous cycles, BTC is now increasingly seen as a long-term reserve asset rather than just a speculative investment. Many investors, including whales and institutions, are holding their BTC with expectations of significantly higher prices in the future. This has reduced panic selling and prevented large-scale market capitulation. Meanwhile, traders in the derivatives market continue to engage in short-term speculation, but the market as a whole remains relatively stable.
Both whales and retail investors are adopting a more cautious approach, choosing to hold or take profits during favorable price volatility. The decline in volatility is a reason why actual market capitalization is increasing more slowly than in previous cycles.
A less volatile market cycle
The current BTC cycle exhibits lower volatility compared to previous cycles. Unlike previous rallies, marked by extreme price volatility and sharp declines, BTC currently experiences corrections that rarely exceed 25%. This reduced volatility indicates a more mature market with strategic trading behaviors.
Leverage trading, which was previously a major driver of BTC volatility, is now more controlled. Traders are managing their risks better, reducing the likelihood of mass liquidations. Additionally, funds focused on BTC continue to maintain their positions instead of reallocating capital into altcoins, further stabilizing the market.
The euphoric phase requires new capital inflows
For BTC to enter a euphoric phase, a wave of new capital inflows may be needed. Previously, BTC's exponential growth was driven by increased adoption and new investors entering the market. However, as BTC becomes more popular, its accessibility has also led to a broader distribution among long-term holders.
The next large influx of capital is expected to come from institutional investors, corporate treasury bonds, and possibly even government reserves. Retail investor participation, while still significant, has slowed in this cycle compared to previous ones. Exchange-traded funds (ETFs) have provided stable demand for BTC, but they have yet to trigger the explosive growth often seen in euphoric phases.
Short-term outlook for BTC
Although not yet in a euphoric phase, BTC is still on a strong upward trajectory. Recent price movements indicate that BTC is consolidating around the $100,000 level rather than immediately spiking parabolically. Many early investors have seized the opportunity to take profits, but there is no consensus on whether the $100,000 range is the cycle peak.
BTC has benefited from increased market interest related to the upcoming U.S. elections, which has fueled speculation and investor optimism. Over 97% of wallets are currently in profit, meaning there is limited selling pressure even from those who bought at higher prices.
In the short term, BTC may attempt to break through the $110,000 level, with the potential to test the $120,000 range in the coming months. However, unless a significant catalyst emerges, the market is likely to maintain a gradual upward trend rather than enter a full-blown euphoric rally.
Conclusion
The current Bitcoin cycle reflects a more controlled and strategic market, with slower but steady growth. While BTC has surpassed $100,000, market capitalization has performed, and other on-chain metrics indicate that the euphoric phase has yet to begin. With long-term holders maintaining their positions and institutions showing increasing interest, BTC is still positioned for higher prices in the future. However, a true parabolic rally may require a wave of new capital inflows, potentially from acceptance by companies and governments. Until then, BTC remains in a phase of steady accumulation and measured price increases.
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