Bitcoin (BTC) has been an outstanding performer over the past week, surging 30% since the U.S. election on November 5. The flagship cryptocurrency surpassed its all-time high (ATH) in March and has hit new highs almost every day over the past seven days. Bitfinex analysts noted that despite the increase in speculative activity, the market remains “relatively stable.”
Bitcoin’s “fair value” is already priced at a higher level
Cryptocurrency markets have surged following Donald Trump’s victory last Tuesday, with the market cap soaring to $3.05 trillion. Bitcoin has led the post-election bull run, with prices up 30% and approaching the $90,000 mark earlier today.
According to a report by Bitfinex Alpha, the rally “highlights a positive reaction to the election results, with investors positioning themselves for potential economic stimulus and regulatory changes.”
During the March highs, BTC’s realized profits peaked at $3.1 billion. Since then, realized profits have gradually declined, “reaching an equilibrium.”
The report states that supply and demand forces have realigned, suggesting that, in addition to the recent price surge, “the market is now pricing a higher ‘fair value’ for Bitcoin.” Meanwhile, the cryptocurrency continues its price discovery.
Furthermore, despite a structural increase in profit-taking, the volume of profit-taking above $70,000 is significantly lower than in the past when Bitcoin traded above this range.
Bitfinex analysts believe this indicates that “a new wave of demand is entering the market” with spot Bitcoin exchange-traded funds (ETFs) buying Bitcoin after the election. In addition, this indicates that new investor interest “could drive further upward momentum in the short term.”
BTC enters a “new phase”
The report highlighted that the BTC ETF saw record inflows, with inflows of approximately $2.28 billion over three days. This performance represents a significant increase from the pre-election de-risking period, when cryptocurrency investment products saw their second-highest single-day outflows.
According to CoinShares data, Bitcoin ETFs saw $1.8 billion in inflows at the end of the U.S. election week, and saw net inflows of $1.1 billion at the start of the week. The performance suggests that demand for the flagship cryptocurrency is recovering as the market adjusts to BTC’s new price levels.
Bitfinex analysts explained that supply was substantial from March to August, but continued buying pressure was not enough to absorb the supply. The recent surge in demand suggests a significant shift in circumstances, as buying interest "is absorbing historically high levels of selling pressure and stabilizing market dynamics:
