(Kitco News) – Volatility remains high in the cryptocurrency market as Bitcoin (BTC) bulls fight to regain control of the price action, but bears aren’t giving up that easily as they look to keep the top crypto pinned below $68,000 before the halving.
Following Tuesday’s 7.45% pullback, Bitcoin climbed back to $66,000 in early trading on Wednesday, only to see bears attempt another smackdown that briefly dropped BTC to a weekly low of $64,510.
BTC/USD Chart by TradingView
The pullback was brief, however, as bulls look determined to push its price higher, and at the time of writing, they have rallied Bitcoin’s price to $66,035, an increase of 1.35% on the 24-hour clock.
According to a report from Grayscale, the crypto market is currently in the “middle” stages of a bull market run as evidenced by Bitcoin’s price breaching its previous all-time high before the halving, the total crypto market cap reaching its previous high, and the fact that meme coins are once again catching the attention of TradFi investors.
Crypto analyst Miles Deutscher provided a breakdown of the report, noting that Grayscale identified spot Bitcoin ETF inflows and strong on-chain fundamentals as the underlying price drivers behind the rally.
“With almost a decade of pent-up retail demand, over $12 billion has now flowed into Bitcoin ETFs in just 3 months,” he said. “ETF inflows have been steadily higher than BTC issuance (now at 3x). Demand > Supply = upward price pressure.”
In their analysis of on-chain fundamentals, Grayscale focused on three key metrics: stablecoin flows, decentralized finance (DeFi) total value locked (TVL), and Bitcoin outflows from exchanges.
“Stablecoin supply on CEXs & DEXs has increased by ~6% between Feb & March,” Deutscher noted. “Increased stablecoin liquidity = more capital readily available for trading.”
“Total value locked in DeFi has more than doubled since 2023. This signals growing user engagement, increased liquidity and smoother DeFi UX,” he added. Bitcoin “outflows are sitting at ~12% of BTC's circulating supply, the lowest in 5 years. This indicates that investor confidence in BTC's value is rising and preference for HODLing > Selling.”
With these catalysts in mind, Grayscale said we are currently in the “mid-phase of the bull market.”
“Despite the inherent uniqueness of each cycle, established onchain patterns and sentiment data have led us to believe that we are currently navigating the ‘mid-phase’ or the 'fifth inning' of the current bull cycle,” the report said. “While progress has been made, we believe there is still room left to run.”
Along with looking at some technical indicators to support this thesis, including Net Unrealised Profit/Loss (NUPL), the Market Value Realised Value (MVRV) Z-Score, and the ColinTalksCrypto Bitcoin Bull Run Index (CBBI), Grayscale also noted that retail interest hasn’t fully returned this cycle as evidenced by lower crypto YouTube subscription rates versus the 2020-21 cycle and lower Google Trends interest for “crypto” compared to 2021.
“This data suggests that a new investor demographic is driving this bull cycle,” Deutscher said.
“In our research, this cycle's momentum may be driven by a different type of investor – one less visible on social media platforms like Twitter or YouTube,” Grayscale said. “The approval of spot Bitcoin ETFs has likely attracted investors more comfortable with traditional investment vehicles. This shift suggests a broader acceptance of Bitcoin, possibly extending its appeal beyond the typical crypto enthusiast to include those who prefer established financial products.”
Grayscale said it remains “cautiously optimistic” about the future of this bull cycle and looks forward to realizing the impact of sidelined institutional players entering the market and additional adoption by retail investors.
“Our conviction in Bitcoin's performance as an asset class remains unwavering as we look to the future. Supported by advantageous market conditions and its established roles as a store of value and hard money, we believe Bitcoin stands poised for continued success,” the report concluded. “Despite the market's vigorous ascent in early 2024, investors must remember the inherent volatility of cryptocurrencies, marked by periodic drawdowns within bull markets. Yet, by maintaining a long-term view, we believe it becomes evident that Bitcoin is in a strong position.”
