Bitcoin’s bull run is currently in full swing, supported by a combination of strong fundamental and technical factors, according to a recent report from Grayscale. The report highlights that it is difficult to predict the start of bull runs in the crypto market, but they often occur around 8-11 months after a Bitcoin supply halving. Grayscale analysts have outlined the key elements of a bull market, categorizing them as precursors and the “fifth inning” to determine the current state of the market.
The report explains that previous bull markets have started with a surge in Bitcoin’s dominance, indicating its role as a leading indicator for the broader crypto market. Typically, a rise in BTC price is followed by a rally in altcoins as investors seek higher returns. Grayscale analyst Michael Zhao stated that Bitcoin’s increasing dominance sets the stage for a rally in altcoins.
However, this cycle is different from previous ones due to three unique catalysts: spot Bitcoin ETF inflows, positive stablecoin inflows, and decreasing BTC balance on exchanges. Grayscale notes that the approval of spot Bitcoin ETFs on January 10 has resulted in consistent capital inflows that surpass BTC issuance, putting upward pressure on the price. Additionally, the growth in stablecoin liquidity indicates the availability of more capital for trading. The report also highlights a decrease in Bitcoin held on exchanges, suggesting a supply squeeze driven by spot Bitcoin ETFs transferring BTC into long-term storage.
To determine the current state of the market, Grayscale uses the Net Unrealized Profit/Loss (NUPL) ratio, which shows that investors who bought Bitcoin at lower prices still hold onto their coins as the price rises. Retail market sentiment is another factor to consider, with data from Sentiment and Google Trends suggesting that retail investor interest is lower compared to the 2021 bull market. However, data from Alternative indicates that market sentiments are similar to those seen at the peak of the 2021 bull market, indicating a potential return of retail investors.
Taking these factors into account, Grayscale concludes that the bull run will continue but advises investors to monitor flows into spot Bitcoin ETFs and macroeconomic factors for any signs of market shifts. As always, readers are reminded to conduct their own research and exercise caution when making investment decisions.