Key Points
- The cryptocurrency market is currently experiencing a bull run, backed by strong fundamental and technical factors.
- Three unique catalysts differentiating this cycle from previous ones include spot Bitcoin ETF inflows, positive stablecoin inflows, and decreasing Bitcoin balance on exchanges.
Bitcoin (BTC) market indicators suggest that the cryptocurrency market is in the midst of a bull run, supported by a combination of solid fundamental and technical factors. It’s challenging to pinpoint the start of crypto bull runs, but Bitcoin price typically peaks 8-11 months after a Bitcoin supply halving.
Signs of a Crypto Bull Run
Historically, crypto bull markets have started with a rise in Bitcoin’s dominance. This trend underscores Bitcoin’s function as a leading indicator for the broader crypto market. Usually, a surge in altcoins is preceded by growth in Bitcoin price as investors seek higher-risk cryptocurrencies for potentially greater returns.
This pattern was evident during the 2021-2022 bull run, when Bitcoin’s gains were quickly followed by a substantial increase in altcoin valuations. Analysts have noted that Bitcoin’s increasing dominance often sets the stage for an altcoin rally.
Unique Catalysts for the Current Cycle
This cycle, however, is distinguished by three unique catalysts: spot Bitcoin ETF inflows, positive stablecoin inflows, and a decreasing Bitcoin balance on exchanges. Spot Bitcoin ETF inflows, in particular, have significantly influenced the positive market dynamics. Since their approval on January 10, capital inflows into spot Bitcoin ETFs have consistently surpassed Bitcoin issuance, exerting upward pressure on the price.
Other drivers of the latest Bitcoin price rally include healthy on-chain fundamentals, such as the supply of stablecoin on exchanges. An increase in stablecoin liquidity indicates the availability of more capital for trading, primarily to purchase cryptocurrencies. This influx of stablecoin capital typically propels the momentum of bull markets.
Simultaneously, a decrease in intent to sell, evidenced by a dwindling supply on exchanges, also supports Bitcoin’s rally. Data reveals that the total number of Bitcoin held in known exchange wallets has dropped to about 12% of the total supply, the lowest level in five years.
Current State of the Bull Market
To understand where the market currently stands, analysts use the Net Unrealized Profit/Loss (NUPL) metric. This metric calculates the percentage profit/loss by dividing the difference between market value and realized value by the market cap. As Bitcoin’s price grew, investors who bought at lower prices continue to hold onto their coins.
Bull markets are often driven by euphoria, fear of missing out (FOMO), and speculative trading from retail investors. Analyzing retail market sentiment can help determine this. Current data suggests that retail investor interest is still substantially lower than the levels witnessed during the 2021 bull market.
However, market sentiment data indicates similarities to the 2021 bull market’s peak, potentially signaling a return of retail investors to the crypto market. This associated greed and FOMO are expected to drive prices higher.
Based on these technical and fundamental factors, the bull run is expected to continue. Investors, however, are advised to monitor flows into spot Bitcoin ETFs and other macroeconomic factors for signs of market shifts.