We are excited to release the third edition of our quarterly series, the 'Guide to Crypto Markets,' produced in collaboration with Coinbase Institutional. This report provides a thorough analysis of key developments in the crypto markets each quarter, including price performance, on-chain analytics, industry events, and derivatives data.
As with the previous issues of this guide, our goal is to provide institutional traders and investors with a better understanding of the digital asset market through actionable insights based on on-chain data. This edition focuses on three main insights: the rapid increase in on-chain activity, the transformative impact of ETFs, and an analysis of the current market cycle:
Key Highlights:
- Gauging the Market Cycle: Crypto markets are known for their distinct cycles of gains and drawdowns. Recent data suggests that despite a second-quarter pullback, we are likely in the middle of the current bull cycle that began in late 2022. Historical patterns indicate that such corrections are typical and align with past market behaviors.
- ETFs Have Altered the Landscape: Spot Bitcoin ETFs have amassed close to $50 billion in AUM within six months, attracting new investors and deepening market liquidity. ETFs have introduced a regulated, familiar investment vehicle that complements existing options, positively impacting the broader crypto ecosystem.
- On-Chain Activity is Increasing Rapidly: Over the past six months, various metrics such as total value locked (TVL), active addresses, and user base size indicate a significant uptick in on-chain activity. This surge is driven by diverse use cases, including lending, staking, and trading. As existing use cases mature and new innovations emerge, on-chain adoption is expected to grow further.
Key Q3 Trends:
Here are a few trends from the past quarter that are worth highlighting from an investor perspective:
Investor Profitability Trends with MVRV
MVRV Momentum is a tool that helps analysts monitor market trends by tracking the average unrealized profit multiple held by investors (MVRV) relative to its 365-day moving average.
Interactive chart explaining MVRV Momentum of ETH
When MVRV trades above its 365-day average, it typically indicates robust uptrends and improving investor profitability, often leading to increased positions during market corrections. Conversely, when MVRV falls below the 365-day average, it often signals significant unrealized losses, increasing uncertainty and risk-off decisions.
In early July, the MVRV ratio found support near its 365-day moving average, suggesting the 2024 uptrend remains intact with positive investor profitability.
BTC Cycle Performance and Drawdowns
The current bull market, which began in late 2022, has seen Bitcoin prices increase by 400%. Following the collapse of FTX, Bitcoin experienced 18 months of steady price appreciation, reaching an ATH of $73k. Afterwards, the market entered a range-bound phase for three months, followed by a -26% drawdown.
Interactive chart explaining Bitcoin cycles
This downtrend is shallower compared to previous cycles, indicating a robust market structure and reduced volatility. The 2023-24 cycle mirrors the 2018-21 and 2015-17 cycles, providing valuable insights into cycle structure and duration.
BTC Spot ETF Balances
Tracking the balances of the top ten US-traded Bitcoin ETFs provides a view of the capital inflow into these products. Spot Bitcoin ETFs have seen unprecedented success, with over $50 billion in AUM, making them the most successful ETF launch in history.
Interactive chart comparing demand from BTC ETFs and new Bitcoin issuance from miners
Since their launch, ETF inflows have also significantly outpaced new Bitcoin issuance, creating substantial demand. This increased demand has driven up trading volumes in both spot and derivatives markets.
BTC Futures Volume and Open Interest
The trading volume and open interest in Bitcoin futures have risen substantially. Traditional futures and perpetual futures both show increased participation and liquidity, reflecting the growing interest in Bitcoin derivatives.
Interactive chart explaining trends in BTC futures
To explore these and other topics in depth and enhance your digital asset investment strategies, explore the full version of the Q3 2024 'Guide to Crypto Markets'.
Download the full report here.
Glassnode remains committed to providing the highest quality data and analysis to support institutional investors in the world of digital assets. Contact us for bespoke reports, data services, and more. For more reports on the current trends in the crypto markets, please visit our Insights blog.
