The cryptocurrency market and its key players are bracing for an emergence from the prolonged crypto winter, which has been largely attributed to the collapse of crypto exchanges and firms during the year 2022, and extending into part of 2023. The industry has experienced a resurgence with Bitcoin and other prominent cryptocurrencies, witnessing a substantial surge in prices; a surge invigorated by renewed interest from institutional investors now vying to join the market via the newly-paved route of spot Bitcoin exchange-traded funds (ETFs).
Supporting this encouraging perspective on the industry’s future is Grayscale, an asset management company and leading Bitcoin ETF issuer. They assert that the industry currently resides within the heart of a crypto bull run.
In a bid to underscore their viewpoint, Grayscale has proffered a thorough report, replete with substantial findings and insights about the road ahead for the crypto industry. Market aficionado, Miles Deutscher, discerningly dissects the report, shedding light on the driving factors behind Grayscale’s assertions.
The report points out some notable flags indicating that we are in the midst of a bull run – such as Bitcoin’s price surmounting its previous zenith prior to the Halving event, the total crypto market cap re-achieving its previous apex, and digital currencies increasingly catching the eyes of traditional financiers.
Two explicit price influencers are emphasized by Grayscale, namely spot Bitcoin ETF inflows, and strong on-chain fundamentals, to fathom how far the flight of this rally could stretch. They note a remarkable influx of nearly $12 billion into Bitcoin ETFs within this quarter, signifying previously untapped retail demands. The inflow of these funds into the ETFs have persistently outpaced BTC issuance, consequently imposing an upward propulsion on prices due to a demand-supply disbalance.
Delving deeper into their research, Grayscale has underscored three essential on-chain factors: stablecoin inflows, the surge in the total value locked up in decentralized finance (DeFi), and BTC outflows from crypto exchanges.
Deutscher opines that the augmented influx of stablecoin supply into centralized and decentralized exchanges by nearly 6% within the months of February and March suggests greater availability of liquid capital for trading.
Indeed, the doubling of the total value locked into DeFi since 2023 portrays an ascending users’ engagement, improved liquidity, and a better user experience within the DeFi ecosystem.
The BTC outflows from various exchanges, which make up approximately 12% of the current circulating supply of BTC (the lowest in half a decade), signals a surge in investor confidence and a preference for holding rather than selling.
Supported by these propellants, Grayscale compares the market status to be in the mid-phase of the bull run, akin to the 5th inning in baseball, a game renowned for turning the tide on the throw of a single pitch.
The NUPL ratio further endorses this analysis, indicating that investors who bought BTC at lower prices are still keeping hold of their assets despite the rising prices.
Deutscher interprets the current MVRV Z-Score, sitting at 3, to be indicative of potential growth. Furthermore, the CBBI, a comprehensive ratio meter, currently reads 79/100, hinting at the market nearing historical peak cycles with some upward gusto to spare.
However, the full onslaught of retail fascination hasn’t quite hit yet in this cycle. This fact remains evident given the comparatively lower cryptocurrency YouTube subscription rates and diminished Google Trends interest for “crypto” against the previous cycle.
Navigating the choppy seas of this bull cycle, Grayscale adopts a “cautiously optimistic” stance, buoyed by the affirmative indicators and thorough analysis captured in their report. This optimism is espied in the current valuation of the total crypto market cap, standing at a robust $2.4 trillion.
