Research Summary
The Q3 2024 ‘Guide to Crypto Markets’ by Glassnode and Coinbase Institutional provides an in-depth analysis of the crypto markets, focusing on the increase in on-chain activity, the impact of ETFs, and the current market cycle. The report also highlights key trends and offers actionable insights for institutional traders and investors.
Key Takeaways
Understanding the Market Cycle
- Current Bull Cycle: Despite a second-quarter pullback, the report suggests that we are in the middle of a bull cycle that began in late 2022. Historical patterns indicate that such corrections are typical and align with past market behaviors.
Impact of ETFs
- ETFs Transforming the Crypto 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
- Rapid Increase in On-Chain Activity: Metrics such as total value locked (TVL), active addresses, and user base size indicate a significant uptick in on-chain activity over the past six months. 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.
Investor Profitability Trends
- MVRV Momentum: The MVRV Momentum tool tracks the average unrealized profit multiple held by investors relative to its 365-day moving average. 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.
Bitcoin ETFs and Futures
- Success of Bitcoin ETFs: Spot Bitcoin ETFs have seen unprecedented success, with over $50 billion in AUM, making them the most successful ETF launch in history. ETF inflows have also significantly outpaced new Bitcoin issuance, creating substantial demand and driving up trading volumes in both spot and derivatives markets.
- Growth in Bitcoin Futures: The trading volume and open interest in Bitcoin futures have risen substantially, reflecting the growing interest in Bitcoin derivatives.
Actionable Insights
- Monitor MVRV Momentum: Investors can use the MVRV Momentum tool to track market trends and make informed decisions during market corrections.
- Consider the Impact of ETFs: The success of Bitcoin ETFs indicates a growing acceptance of crypto as a mainstream investment. Investors should consider the impact of ETFs on market liquidity and demand.
- Track On-Chain Activity: The increase in on-chain activity suggests a growing adoption of crypto for diverse use cases. Investors should monitor these trends to understand the evolving crypto landscape.
- Understand Bitcoin Futures: The growth in Bitcoin futures trading volume and open interest indicates increased interest in Bitcoin derivatives. Investors should consider these trends when formulating their investment strategies.
