Is the bull market of cryptos just getting started?
Let's dive deep into a market analysis of Bitcoin. As the primary cryptocurrency by market capitalization, monitoring it can provide insights into the tendencies of the broader crypto market.
After a lengthy two-year period, there's a noticeable resurgence in the cryptocurrency realm. Since the onset of the year, the overall cryptocurrency market has surged by 35%, standing merely 20% away from surpassing its record high of $2.8 trillion in late 2021.
Given such a substantial increase, concerns may arise about the sustainability of crypto's upward trajectory, possibly rendering present investments too precarious. Nevertheless, upon scrutinizing the data, it becomes apparent that the cryptocurrency bull market has yet to reach a local peak.
In simpler terms, while certain gains might be in the past, the cryptocurrency market still holds ample potential
Breaking down Bitcoin
As it constitutes roughly half of the cryptocurrency market's value, analyzing Bitcoin's present state can offer insights into the overall market situation. Illustrated here is a chart depicting Bitcoin's Market Value to Realized Value (MVRV), a metric coined by analysts David Puell and Murad Muhmudov. MVRV calculates Bitcoin's market value by its realized value.
Source: TradingView
Market value, akin to market capitalization, is derived by multiplying Bitcoin's circulating supply by its prevailing price. In contrast, realized value is computed by establishing the price of each Bitcoin during its last transaction, offering a more nuanced understanding of market dynamics by eliminating the assumption that every Bitcoin in circulation was acquired at the most recent price.
By dividing these values, we obtain the MVRV, furnishing a more detailed perspective on Bitcoin's current status. Historically, MVRV has served as a timely gauge of when the broader crypto market has reached its zenith or nadir. Presently standing at just 2.3, Bitcoin's MVRV remains distant from the levels around 3.5 typically indicative of waning momentum in bull markets.
Is there a scarcity of Bitcoin in the crypto market?
In February, approximately 50,000 Bitcoins [BTC] were withdrawn from centralized exchanges, resulting in a notable decline in the world's leading cryptocurrency's available supply for purchase.
According to an analysis conducted by AMBCrypto using data from CryptoQuant, Bitcoin's exchange reserves steadily decreased throughout the month despite a concurrent 44% surge in its market price.
The significance of this as a bullish signal lies in the typical interpretation: a reduction in exchange supply suggests diminished selling pressure and a potential transition towards activities such as long-term holding.
Furthermore, the accumulation and storage of more Bitcoins in self-custodial and cold wallets contributed to a scarcity in the market, a crucial bullish indication according to supply-demand dynamics.
A notable reflection of the prevailing hoarding sentiment was the substantial rise in the number of institutional investors, often referred to as whales in the crypto market. In February alone, the number of unique entities holding at least 1,000 Bitcoins increased by 55, marking nearly a 4% rise from the preceding month.
The introduction of numerous exchange-traded funds (ETFs) linked to Bitcoin's spot price facilitated access to the crypto market for traditional finance (TradFi) investors in the U.S. This pivotal development spurred optimistic forecasts, with one study projecting Bitcoin to reach $100,000 by year-end and close to $200,000 by the conclusion of 2025.
It's plausible that such optimistic predictions motivated whale investors to amass significant quantities of Bitcoins during this period.