Research Summary
The report discusses Bitcoin’s impressive performance in 2023, with a year-to-date (YTD) appreciation of over 140%. It has outperformed gold and other digital assets, with a majority of Bitcoin investors now in profit. The report also compares Bitcoin’s performance with previous cycles and assesses on-chain indicators related to investor response.
Key Takeaways
Bitcoin’s Stellar Performance
- Bitcoin’s Appreciation: Bitcoin has appreciated over 140% YTD, outperforming gold and other digital assets. It has more than doubled relative to gold and continues to dominate the digital asset industry.
- Comparison with Previous Cycles: The report compares Bitcoin’s performance with previous cycles, noting similarities in terms of recovery duration and drawdown since the all-time high (ATH). Bitcoin’s performance since the cycle high is similar to the 2013-17 and 2017-21 periods.
Exchange Activity and Investor Response
- Exchange Activity: Despite a strong year, the number of transactions depositing funds to exchanges continues to drop to multi-year lows. However, the volume of funds flowing in and out of exchanges has grown considerably from $930M to over $3B (+220%), indicating an expanding interest from investors.
- Investor Response: The report assesses on-chain indicators related to investor response, noting that a super-majority of Bitcoin holders are now back in profit. Several on-chain metrics suggest the market has transitioned from a ‘transitional recovery zone’ to an ‘enthusiastic bull market’.
Bitcoin Holders in Profit
- Long-Term Holders: The YTD rally has seen the proportion of long-term holders’ holdings in profit increase from 56% to 84%, breaking above the all-time average value of 81.6%. This has historically aligned with a transition towards strong up-trending markets.
- Short-Term Holders: Almost all short-term holders are in profit, with over 95% of their holdings having a cost basis below the current spot price. This is historically associated with enthusiastic uptrends.
Profit Realization
- Profit Realization: The report assesses shifts in profit taking and spending by investors. Several Spent Output Profit Ratio (SOPR) variants are trading above 1.0, suggesting the average spent coin is locking in a profit across many cohorts. The net USD denominated realized profit locked in by the market has reached $324M/day, suggesting that while market performance is strong, it remains within the bounds of an early rather than a late-stage bull market.
Actionable Insights
- Monitor Exchange Activity: Despite the decrease in the number of transactions depositing funds to exchanges, the volume of funds flowing in and out of exchanges has grown significantly. This suggests an expanding interest from investors, which should be closely monitored.
- Assess Investor Response: With a super-majority of Bitcoin holders now in profit, it’s important to assess investor response and monitor on-chain indicators for any shifts in market sentiment.
- Track Profit Realization: As several SOPR variants are trading above 1.0, it’s crucial to monitor shifts in profit taking and spending by investors. This can provide insights into market performance and potential future trends.
