02.03.2024

5 main features of the growth of Bitcoin and the cryptocurrency market in general

2021 started off great for Bitcoin. Back in early January, the value of the main cryptocurrency reached $ 28 thousand, and on Saturday BTC set another record at $ 61,711.

Over the past couple of months, Bitcoin has experienced two relatively large corrections, but even they did not prevent the coin from delighting investors every time by reaching a new all-time high.

We checked the actual data: Bitcoin is trading at $ 58,535 this morning, down 4.3 percent from a day ago. Despite this, the growth of the first cryptocurrency in a year still exceeds the thousand percent mark. Now the indicator is at the level of 1018 percent per annum.

Here is a graph of BTC’s behavior for a week.

bitcoin chart rate

Bitcoin price chart for a week

However, markets do not usually move strictly in one direction – even Bitcoin in the future may go through many phases of growth, decline and accumulation. To better understand what is happening in the industry, CEO of analytics platform CryptoQuant Ki Yong Joo shared five details that should be closely monitored in the near future.

Professional Investor Behavior

The key difference between the current rally and the 2017 bullish trend is that it was driven by huge retail demand at the time, Ju noted. That is, in fact, these were ordinary people who heard about cryptocurrencies and became interested in the topic, Decrypt reports. This time, large companies and investors are already accumulating large amounts of bitcoins, while the bulk of individual investors have not yet succumbed to the hype around cryptocurrencies.

Take a look at the current Bitcoin balance on the exchanges. At the end of 2017, the BTC balance on the trading floors was at an all-time high at the time, as retail investors flooded the market and stored their coins on exchanges. But already in March 2020, this indicator began to decline steadily.

Bitcoin blockchain exchanges

Change in the amount of BTC on exchanges against the background of the cryptocurrency price

In other words, professional large investors «pump out» the volumes of assets that can be found on trading floors. Coins are transferred to cold wallets for long-term storage, hence the «supply shock» – too many buyers and too little BTC on exchanges, which leads to an increase in their price.

Activity of major players in the cryptocurrency market

Recall that large holders of BTC in the amount of several thousand coins are called whales in the cryptocurrency industry. Ki Yong Joo advises keeping an eye on the seven-day average of the change in coin deposits on exchanges. If this indicator starts to grow, then the whales are massively transferring BTC to trading platforms, preparing for their sale. Usually, after this, the value of Bitcoin begins to decline sharply.

Ju explained that whales tend to realize their profits when retail investors are more active on exchanges, which can happen during times of extreme fear. As a result, this indicator can often provide an appropriate signal when the market has bottomed out and indicate the presence of a large number of retail investors.

As you can see from the chart, the red line tends to spike when there are large drops in price, or when Bitcoin hits a local bottom in value.

Bitcoin blockchain exchanges

Average inflow of coins to exchanges (on the red chart)

We can conclude that now the market is dominated by whales, and there are few retail investors. This means that the market has not yet reached the stage of the end of 2017, that is, the global top of this bullish cycle is still relatively far away.

Situation on the Coinbase Pro exchange

Coinbase Pro is one of the most popular platforms for professional investors for large BTC purchases. Large outflows of coins from this site indicate another round of large investments in the market, while large inflows of coins, on the contrary, signal an impending collapse.

The last significant coin outflow from Coinbase Pro was in the $ 48K to $ 50K price range. Therefore, I think that this range is a zone of accumulation of BTC for professional investors.

Another indicator of the high activity of buyers on Coinbase Pro can be the so-called «Coinbase Reward». This is the difference between the Bitcoin price on Coinbase and the Binance cryptocurrency exchange. Since Coinbase’s premium was almost always positive earlier this year, Bitcoin’s price has continued to rise. As of this writing, there is practically no big gap in BTC value between Coinbase and Binance.

Volumes of stablecoins on exchanges

Another key metric, according to the CEO of CryptoQuant, is the ratio between the volumes of BTC and stablecoins held on cryptocurrency exchanges. When the metric rises – which means there are more bitcoins on the exchange compared to stablecoins – this indicates an increase in pressure from sellers. Conversely, with an increase in the volume of stablecoins compared to the volume of BTC, we can talk about potential market growth.

Bitcoin blockchain exchanges

BTC to stablecoin ratio

When Bitcoin started to rise towards the end of last year, the aforementioned ratio also began to increase as traders exchanged their stablecoins for bitcoins. But since then it has continued to decline.

Impact of Bitcoin miners on the market

Bitcoin miners receive about 1,000 BTC in block mining rewards and transaction fees worth approximately $ 55 million daily. To pay the costs of equipment maintenance, electricity, rent and other things, they now sell some of their newly mined coins to the market, and hold the rest until the price of Bitcoin rises.

blockchain cryptocurrency chart

Volumes of coins transferred from miners’ wallets to exchanges

During the first correction of the main cryptocurrency this year, one of the major miners associated with the F2Pool pool sold a particularly large volume of BTC, according to Ju. In part, he contributed to the fall in the price of Bitcoin in January. Recently, however, the influence of miners on the market has weakened. This is due to the fact that large investors have time to buy back the coins «thrown» for sale, thereby holding back a potential collapse. And this is another difference between the current stage of coin growth.

We believe that the current stage of coin growth is really quite different from the events of 2017. Its main feature is the presence on the market of large professional investors and world famous companies such as Tesla and MicroStrategy. It adds reputation points to cryptocurrencies in general, which ordinary investors gradually learn about. Therefore, while the upward trend is likely to continue.

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