Translation: Blockchain in Vernacular
We are pleased to release the third edition of our quarterly series, The Crypto Market Guide, produced in partnership with Coinbase Institutional. This report provides in-depth analysis of key developments in the crypto markets each quarter, including price performance, on-chain analysis, industry events, and derivatives data.
As with previous editions, our goal is to provide institutional traders and investors with a better understanding of the digital asset market through actionable insights based on on-chain data. This edition focuses on three main insights: the rapid increase in on-chain activity, the transformative impact of ETFs, and an analysis of the current market cycle.
Key Highlights:
Assessment of market cycles: Crypto markets are known for their unique ups and downs cycles. The latest data suggests that despite a pullback in the second quarter, we may be in the middle of the current bull cycle that begins in late 2022. Historical patterns suggest that this adjustment is typical and consistent with past market behavior.
ETFs have changed the landscape: Spot Bitcoin ETFs have accumulated nearly $50 billion in assets under management (AUM) in six months, attracting new investors and deepening market liquidity. ETFs have introduced a regulated and familiar investment tool that complements existing options, which has a positive impact on the entire crypto ecosystem.
Rapid increase in on-chain activity: Over the past six months, various metrics such as total value locked (TVL), active addresses, and user base size have shown significant growth in on-chain activity. This surge is driven by a variety of use cases, including lending, staking, and trading. On-chain adoption is expected to grow further as existing use cases mature and new innovations emerge.
1. Key trends in the third quarter
Here are some trends worth noting from an investor perspective over the past quarter:
1) Investor Profit Trend and MVRV
MVRV momentum is a tool that helps analysts monitor market trends. It works by tracking the change in the multiple of unrealized profits (MVRV) held by investors relative to its 365-day moving average.
When MVRV trades above its 365-day average, it typically indicates a strong uptrend and improving investor profitability, often leading to increased positioning during market corrections. Conversely, when MVRV falls below the 365-day average, it often signals significant unrealized losses, increasing uncertainty and risk-off decisions.
In early July, the MVRV ratio found support near its 365-day moving average, suggesting that the uptrend into 2024 remains intact and leads to positive investor profitability.
2. BTC cycle performance and retracement
The current bull run that began in late 2022 has seen a 400% increase in Bitcoin prices. After the FTX crash, Bitcoin experienced a steady price increase that lasted 18 months, reaching an all-time high of $73,000. The market then entered a range-bound phase that lasted three months, followed by a -26% retracement.
This decline is more gradual than previous cycles, indicating strong market structure and reduced volatility. The 2023-24 cycle is similar to the 2018-21 and 2015-17 cycles, providing valuable insights into cycle structure and duration.
1) Bitcoin Spot ETF Balance
Tracking the balances of the top ten U.S.-traded Bitcoin ETFs provides insight into the inflows into these products. Spot Bitcoin ETFs have been an unprecedented success, with over $50 billion in AUM, making them the most successful ETF launch in history.
Since their launch, ETF inflows have also significantly exceeded new Bitcoin issuances, creating huge demand. This increased demand has driven higher trading volumes in spot and derivatives markets.
2) Bitcoin futures trading volume and open interest
Bitcoin futures volumes and open interest surged. Both traditional and perpetual futures showed increased participation and liquidity, reflecting the growing interest in Bitcoin derivatives.
For a deeper dive into these and other topics to enhance your digital asset investment strategy, check out the full version of the Crypto Market Guide for Q3 2024.
Download the full report here: https://get.glassnode.com/guide-to-crypto-markets-q3-2024/?utm_source=Insights&utm_medium=content&utm_campaign=Q3_Guide
