After months of incessant turmoil, the cryptocurrency industry has experienced something of a breakout in the last two weeks, and total market capitalization has recently hit the $ 2 trillion mark for the first time since mid-May.
In fact, only in the last 21 days, the exorbitant figure of USD 700 billion has entered the market for digital assets, which leads many to think that more money can flow to the sector in the short term.
Two recent events appear to have created this bullish sentiment: the successful London hard fork of Ethereum, which makes the network appear more scalable, and the introduction of the recent infrastructure bill by the US Senate and its tax implications for companies in the United States. cryptocurrencies in the US
Kadan Stadelmann, CTO of blockchain solutions provider Komodo told Cointelegraph:
“Regardless of the legislative outcome, this discussion is placing cryptocurrencies at the forefront of American politics and generating more public awareness of Blockchain technology. Another outcome is that traditional financial institutions will likely increase crypto accumulation if the clarifications are formally adopted. policies “.
A closer look at some off-chain data
Stadelmann said that Bitcoin (BTC) accumulation is currently occurring among whales, as well as miners, with exchange withdrawals creating a decline in supply, suggesting that the price may continue to rise in the short term. With that said, he believes that although BTC may rise to as high as $ 50,000, or possibly a little more, it will be difficult for the major cryptocurrency to regain its all-time high of $ 65,000.
It is evident that The main factor fueling Ether’s recent bullish momentum has been its recent London update. In fact, according to published data by cryptocurrency analytics firm Glassnode, there have been several spikes in the major altcoin’s exchange withdrawals metrics, which for Marie Tatibouet (chief marketing officer for crypto exchange Gate.io) suggests that an increasing number of people have continued to accumulate ETH off exchanges.
In addition, he highlighted that the total value locked in decentralized finance contracts, or DeFi, has also exceeded $ 80 billion for the first time since the first quarter of 2021. In addition, the number of ETH tokens wagered on the Beacon Chain has exceeded $ 6.5 million. “Overall these are very positive signals telling us that the market is confident in Ethereum,” Tatibouet said.
HODLing sentiment is strong
The build-up of Bitcoin has continued behind the scenes, as Cointelegraph already reported, and the total supply of Bitcoin in the hands of long-term holders has recently reached an all-time high of 82.68%. Conversely, short-term supply in the hands of holders has continued to decline, falling to around 20%. What this seems to suggest is that an increasing number of BTC holders are looking to hold onto their holdings.
Glassnode’s analysis team highlighted that Whenever the ratio of currencies held by short-term holders reaches 20% or less, it is followed by a significant reduction in supply, that is, a shortage that, most of the time, contributes to driving the price of the asset underlying.
Not only that, earlier this week the dominance of Bitcoin transactions exceeding a million dollars more than doubled (going from 30% to 70% of the total value transferred) for the first time since September 2020. In this regard, given that most retail investors do not tend to facilitate high volume transactions, Glassnode’s team believes that institutional investors could have been behind the increase in the number of transactions from 1 million to 10 million dollars.
BTC whales refuse to sell
According to the cryptocurrency analytics company, Santiment, Bitcoin millionaires around the world, that is, wallet addresses that have between 100 and 10,000 bitcoins, have not yet sold their coins to take a quick profit. The total BTC held by these addresses now stands at 9.23 million, which equals the all-time high reached on July 28.
Furthermore, the net flow of Bitcoin on digital asset trading platforms towards addresses likely designated for storage has been impressive of late. According to updates from analytics platforms like Whale Alert, they move tens of thousands of BTC daily, which demonstrates healthy transactional activity in the cryptocurrency ecosystem.
Yuriy Mazur, head of data analysis of CEX.IO Broker, a platform for trading cryptocurrencies through contracts for difference, told Cointelegraph that This data suggests that most holders are optimistic about short-term market growth and are not planning to divest their positions, regardless of the negative news that has shaken the market recently. He added:
“With a projection that the price of Bitcoin will skyrocket from its current price of around $ 45,000 to beyond $ 70,000 by the end of the year, many investors are already looking forward to being a part of this historic price spike.”
Institutional interest remains high
According to the on-chain analysis service, CryptoQuant, Bitcoin reserves on derivatives exchanges around the world have continued to decline to levels not seen since before May, when the recent market crash had not yet occurred. In this sense, the company confirmed that, as of August 10, the reserves of derivatives exchanges amounted to 1,256 million bitcoins, the lowest level since May 11.
That being said, it seems that Funds are flowing back into Grayscale’s Bitcoin Trust, as recent data suggests that a growing list of traditional players have continued to add to their cryptocurrency coffers over the past few months. Not only that, there is enough information to suggest that even during the most intense phase of this year’s BTC bull run, derivatives balances rose inversely: declining reserves characterized only the start of the run to $ 64,500. .
It seems that most institutional players have not been the least daunted by the wave of negative news surrounding the cryptocurrency market, such as the route of the miners of China or the current political drama over America’s infrastructure bill. This is made evident by the fact that earlier this week, the total number of Bitcoin holdings from exchanges stood at around 2.44 million bitcoins, a three-month low.
There have been no big panic sales
It’s no secret that the market crash in 2018 was driven, in large part, by the craze for initial coin offerings (ICOs), who saw hundreds of startups amassing billions of dollars of capital to flee quickly in no time. When the bubble burst, the total market valuation of the entire crypto industry fell from $ 700 billion to $ 102 billion in a period of less than 11 months, thus showing a loss of more than 85%.
On the other hand, the price rally in 2021 appears to have arisen due to strong macroeconomic factors driven, in large part, by investors hunting for monetary safe havens, thanks to the monetary policies pursued by central banks around the world. To put things in perspective, over the past year and a half, world debt figures have continued to grow, currently standing at more than $ 281 trillion (roughly 355% of the world’s gross domestic product).
Finally, according to Institute of International Finance, this indebtedness will only increase in the short term (by at least another USD 10 trillion by the end of 2021), Especially since variants of COVID-19 continue to wreak havoc around the world.
With all of this data, it appears that the current positive momentum surrounding the crypto market is largely being fueled by strong fundamentals as well as strong innovation.