According to Glassnode, Bitcoin (BTC), has taken in approximately $450 Billion of additional capital from November 2022. This brings the Realized Cap up to $850 Billion.
In the report, it was noted that Bitcoin had maintained its price at or above $100,000 since several weeks. Seven years ago Bitcoin reached $10,000 during a bull run in 2017.
According to Glassnode, the growth in Bitcoin’s realized cap is driven by its increasing role on the global stage, which has attracted institutions and sovereign entities.
In the report, nation-states that have adopted Bitcoin are highlighted as key factors. Bhutan has engaged in massive mining operations. El Salvador established Bitcoin as legal tender. The US is considering it as an asset for strategic reserves.
Bitcoin is one of the world’s largest assets, despite ongoing controversy over its value. With a market capitalization of $2 trillion, it has surpassed silver’s $1.8 trillion, Saudi Aramco’s $1.8 trillion, and Meta’s $1.7 trillion market caps.
As Bitcoin’s valuation increases, larger capital inflows are required to sustain its market growth. The Realized Cap metric, which tracks the cumulative net capital inflow, highlights Bitcoin’s growth.
Bitcoin is also a payment network that operates decentralized. The Bitcoin network processed $8,7 billion in daily economic transactions adjusted, totaling $3,2 trillion, over the course of the last 12 months.
The metrics presented here challenge the claim that Bitcoin is a useless and worthless currency.
The demand is still low
Since the collapse of FTX in November 2022, Bitcoin’s dominance within the digital asset ecosystem has increased, rising from 38% to 59%.
Bitcoin’s market capitalization has increased 5.3x from $363 billion to $1.93 trillion, whereas the altcoin market has expanded 4.7x from $190 billion to $892 billion. BTC is attracting a larger proportion of capital despite the correlation between Bitcoins and other altcoins.
Also, institutional investors prefer Bitcoin. This is made possible by US Bitcoin spot exchange-traded fund (ETFs). The report attributed this interest to Bitcoin’s inherent scarcity and its role as a hedge against fiat currency debasement.
The increased interest of nations and institutions in Bitcoin hasn’t been sufficient to create new demand, as it remains lower than previous cycles.
The changing investor behaviour
Glassnode says that new demand is now coming in bursts, rather than in steady inflows as in previous cycles. The small retail sector has seen a decline in participation compared with the peak of 2021, whereas larger companies have increased their stakes.
Despite favorable market conditions, Google’s search interest for Bitcoin has not reached 2021 levels. Retail investors are increasingly strategic in their accumulation.
In just one year, institutional investors have gained exposure to Bitcoin through the introduction of US spot ETFs. Over $40 billion has been invested in these ETFs in addition to over $120 million in assets.
Bitcoin investors have shown resilience in the face of market declines. Current cycle realized lower losses than prior cycles. Only the August 5th, 2024 yen carry unwind is significant. The report also highlighted that Bitcoin’s drawdowns have been more controlled, with lower realized volatility, unlike past cycles.
This cycle’s price movement has seen a number of rallying periods followed by consolidation phases, which have contributed to the more stable structure of the market attributed to players who are more experienced in trading Bitcoin and other crypto.
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