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Grayscale Drops Bombshell Report: Crypto Bull Run Progresses To ‘Middle’ Phase, Future Outlook Detailed

The cryptocurrency market has witnessed a significant surge after a prolonged bear market and the intensified crypto winter caused by the collapse of crypto exchanges and firms during 2022 and part of 2023. 

Notably, Bitcoin and other major cryptocurrencies have experienced substantial price surges, accompanied by renewed interest from institutional investors entering the market through recently approved spot Bitcoin exchange-traded funds (ETFs). 

Adding to the industry’s positive outlook, asset manager and Bitcoin ETF issuer, Grayscale, believes that the current state of the market indicates that the industry is in the “middle” stages of a crypto bull run. 

Grayscale recently released a comprehensive report detailing their key findings and insights into what lies ahead. A closer analysis of the report by market expert Miles Deutscher sheds light on the factors contributing to this assessment.

On-Chain Metrics And Institutional Demand

Grayscale’s report starts by highlighting several key signals indicating that the market is currently in the middle of a bull run. These include Bitcoin’s price surpassing its all-time high before the Halving event, the total crypto market cap reaching its previous peak, and the growing attention from traditional finance (TradFi) towards meme coins.

To understand how long this rally might sustain, Grayscale emphasizes two specific price drivers: spot Bitcoin ETF inflows and strong on-chain fundamentals.

Grayscale notes that nearly $12 billion has flowed into Bitcoin ETFs in just three months, indicating significant “pent-up” retail demand. Moreover, ETF inflows have consistently exceeded BTC issuance, creating upward price pressure due to the demand-supply imbalance.

Grayscale’s research focuses on three critical on-chain metrics: stablecoin inflows, decentralized finance (DeFi) total value locked (TVL), and BTC outflows from exchanges.

According to Deutscher, the increase in stablecoin supply on centralized exchanges (CEXs) and decentralized exchanges (DEXs) by approximately 6% between February and March suggests enhanced liquidity, making more capital readily available for trading.

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Furthermore, for the analyst, the doubling of the total value locked into DeFi since 2023 represents growing user engagement, increased liquidity, and improved user experience within the DeFi ecosystem.

The outflows from exchanges, which currently account for about 12% of BTC’s circulating supply (the lowest in five years), indicate rising investor confidence in BTC’s value and a preference for holding rather than selling.

Based on these catalysts, Grayscale asserts that the market is in the “mid-phase” of the bull run, likening it to the “5th inning” in baseball. 

Promising Outlook For Crypto Industry

Several key metrics support Grayscale’s analysis, including the Net Unrealized Profit/Loss (NUPL) ratio, which indicates that investors who bought BTC at lower prices continue to hold despite rising prices. 

According to Deutscher, the Market Value Realized Value (MVRV) Z-Score, currently at 3, implies that there is still room for growth in this cycle. Additionally, the ColinTalksCrypto Bitcoin Bull Run Index (CBBI), which integrates multiple ratios, currently stands at 79/100, suggesting that the market is approaching historical cycle peaks with some upward momentum remaining. 

Furthermore, retail interest has yet to fully return this cycle, as evidenced by lower cryptocurrency YouTube subscription rates and reduced Google Trends interest for “crypto” compared to the previous cycle.

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Ultimately, Grayscale retains a “cautiously optimistic” stance regarding the future of this bull cycle, given the promising signals and analysis outlined in their report.

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Featured image from Shutterstock, chart from TradingView.com 

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United States Dominates Global Crypto Market With Massive $9.3 Billion In Profits

In a recent report by market intelligence firm Chainalysis, it has been revealed that global crypto gains in 2023 amounted to a staggering $37.6 billion. This profit surge reflects improved asset prices and market sentiment compared to 2022. 

Although this figure falls short of the $159.7 billion gains witnessed during the 2021 bull market, it signifies a significant recovery from the estimated losses of $127.1 billion experienced in 2022.

Sharp Surge In Crypto Gains

The report suggests that despite similar growth rates in crypto asset prices in 2021 and 2023, the total gains for the latter year were lower. According to Chainalysis, this discrepancy could potentially be attributed to investors’ decreased inclination to convert their crypto assets into cash. 

The analysis further suggests that investors in 2023 seem to have anticipated further price increases, as crypto asset prices did not exceed previous all-time highs (ATHs) during the year, unlike in 2021.

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Cryptocurrency gains remained relatively consistent throughout 2023, except for two consecutive months of losses in August and September, as seen in the image above. However, gains surged sharply thereafter, with November and December eclipsing all previous months.

United States Leads

Leading the pack in cryptocurrency gains was the United States, with an estimated $9.36 billion in profits in 2023. The United Kingdom secured the second position with an estimated $1.39 billion in crypto gains. 

Notably, several upper and lower-middle-income countries, particularly in Asia, such as Vietnam, China, Indonesia, and India, achieved significant gains, each surpassing $1 billion and ranking within the top six countries worldwide. 

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Chainalysis had previously observed strong cryptocurrency adoption in these income categories, particularly in “lower-middle-income” countries, which demonstrated resilience even during the recent bear market. The gains estimates indicate that investors in these countries have reaped substantial benefits from embracing the asset class.

Ultimately, the Chainalysis report suggests that the positive trends observed in 2023 have carried over into 2024, with prominent cryptocurrencies such as Bitcoin (BTC) hitting all-time highs of $73,700 following the approval of Bitcoin exchange-traded funds (ETFs) and increased institutional adoption. 

If these trends persist, the firm believes that it is conceivable that gains in 2024 will align more closely with those witnessed in 2021. 

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As of this writing, the total crypto market cap valuation stands at $2.5 trillion, a sharp drop of over 4% in the last 24 hours alone, and down from Thursday’s two-year high of $2.7 trillion. Bitcoin, on the other hand, is trading at $68,400 after dropping as low as $65,500 but has quickly regained its current trading price, limiting losses to 4% over the past 24 hours.

Featured image from Shutterstock, chart from TradingView.com 

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Crypto Sentiment Index Stays Bullish Despite Corrections, Report Reveals Positive Outlook

In a recent blog post, ETC Group’s Head of Research, Andre Dragosh, provided a comprehensive analysis of the current state of the crypto market. Dragosh’s findings shed light on the market’s performance dynamics, profit-taking activity, and derivative trends.

High-Risk Appetite In Crypto Market

According to Dragosh’s analysis, crypto assets showcased their resilience as they outperformed traditional assets like equities, supported by a significant repricing in monetary policy expectations and short futures liquidations at the beginning of last week. 

However, this outperformance encountered some limitations in the short term due to stronger-than-expected US jobs data, which began to dampen the recent rally. The US non-farm payroll growth and unemployment rate surpassed consensus estimates, leading to a reversal in US Treasury yields and a decrease in overall risk appetite across traditional financial markets.

Notably, altcoin outperformance gained momentum during the period, with Avalanche (AVAX) and Cardano (ADA) returning over 50% each. Among the top 10 crypto assets, Avalanche, Cardano, and Polkadot (DOT) stood out as the relative outperformers. 

According to Dragosh, this surge in altcoin outperformance compared to Bitcoin (BTC) indicates a “high-risk appetite” within the crypto market. On the other hand, on-chain data for Bitcoin suggests that investors are increasingly taking profits, evidenced by the rising number of coins in profit being sent to exchanges.

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ETC Group’s in-house Crypto Asset Sentiment Index remained relatively elevated compared to the previous week, indicating positive market sentiment. However, major reversals to the downside were observed in the Crypto Dispersion Index and the BTC 25-delta 1-month option skew. 

The Crypto Fear & Greed Index continued to reside in “Greed” territory, reflecting ongoing market optimism. Although ETC Group’s Cross Asset Risk Appetite (CARA) measure declined slightly, it remained in positive territory, signaling a decrease in risk appetite in traditional financial markets.

Performance dispersion among digital assets decreased compared to the previous week but remained relatively high. This implies that correlations among crypto assets have decreased, and investments are driven by coin-specific factors, highlighting the importance of diversification among digital assets.

Short-Term Holders Cash In

The market remains in a strong profit environment, with a significant percentage of BTC and ETH addresses in profit. According to Dragosh, profit-taking activity, particularly among short-term holders, has increased as Bitcoin approaches recent highs, leading to higher selling pressure. 

Long-term holders have also increased their transfers of profitable coins to exchanges, potentially hindering short-term price increases. However, it is worth noting that there is no evidence of older coins being spent, which would indicate a larger price correction.

On the other hand, aggregate open interest in BTC futures and perpetual remained stable, with notable futures short liquidations recorded. BTC option open interest saw a significant increase, accompanied by relative put-buying and an increase in the put-call open interest ratio. 

The 25-delta BTC option skews also increased, indicating higher demand for puts compared to calls. However, overall at-the-money (ATM) implied volatilities did not change significantly.

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At the time of writing, BTC has lost its $42,000 support line, trading at $41,600, down 5% in the last 24 hours.

Featured image from Shutterstock, chart from TradingView.com