Original Article Title: Riding the Liquidity Tide

Original Article Authors: CryptoVizArt, UkuriaOC, Glassnode

Original Article Translation: Baishui, Golden Finance

Abstract

· Strong capital inflows from ETFs and the spot market drove Bitcoin to rise to $93,000. Over the past 30 days, over $62.9 billion entered the market, with BTC dominating the inflows.

· The increase in unrealized profits by long-term holders triggered large-scale spending activity, with 128,000 bitcoins sold between October 8 and November 13.

· U.S. spot ETFs played a key role, absorbing about 90% of the selling pressure from long-term holders during the analysis period. This highlights the increasing importance of ETFs in maintaining liquidity and market stability.

Surge in Capital Inflows

Since early November, Bitcoin has shown outstanding price performance, continually setting new ATHs throughout the month. When comparing the price performance of the current cycle with the 2015-2018 period (blue) and the 2018-2022 period (green), astonishing sustained similarity can be seen. Despite significant differences in market conditions, the magnitude and duration of the rebound are remarkably consistent.

This cross-cycle long-term consistency remains very intriguing, providing insights into Bitcoin's macro price behavior and cyclical market structure.

Historically, past bull markets have lasted between 4 to 11 months from the current point, providing a historical framework for assessing cycle duration and momentum.

This week, a new ATH was set at $93,200, bringing Bitcoin's quarterly performance to an impressive +61.3%. This is an order of magnitude higher than the relative performance of gold and silver, which saw quarterly gains of +5.3% and +8.0%, respectively.

This stark contrast indicates that capital may be shifting from traditional value assets like commodities to Bitcoin, a younger, emerging, and digital asset.

Bitcoin's market capitalization has also expanded to a staggering $1.796 trillion, making it the seventh-largest global asset. This places Bitcoin above two symbolically significant global assets: silver valued at $1.763 trillion and Saudi Aramco valued at $1.791 trillion.

So far, Bitcoin is only 20% behind Amazon, making it the next important milestone in its journey to becoming one of the world's most valuable assets.

After Bitcoin's impressive performance in the last 90 days, the wider digital asset market has started to see a significant inflow of funds. In the past 30 days, a total of $62.9 billion has flowed in, with $53.3 billion absorbed by the Bitcoin and Ethereum networks, and stablecoin supply increasing by $9.6 billion.

This is the highest level since the peak in March 2024, reflecting renewed confidence post the U.S. presidential election and new demand.

Expanding observed capital inflows, the majority of the $9.7 billion stablecoins minted in the last 30 days have been directly deployed to centralized exchanges. This inflow is closely tied to the overall movement of stablecoin assets during the same period, highlighting its key role in driving market activity.

The surge in exchange stablecoin balances reflects investors' strong speculative demand to ride the trend, further reinforcing the bullish narrative and post-election momentum.

Examining Investor Profitability

So far, we have explored the trend of increasing market liquidity, supporting Bitcoin's outstanding performance. In the next section, we will utilize the MVRV ratio to assess how this price action affects market investors' unrealized profitability (paper gains).

Comparing the current value of the MVRV ratio (orange) with its annual moving average (blue), we can see the accelerated growth in investor profitability. This phenomenon is typically supportive of continued market momentum but also creates conditions where investors are more likely to start taking profits to realize their paper gains.

As market investors' profitability increases, the potential for new selling pressure grows. By overlaying the MVRV ratio with ±1 standard deviation bands, we can construct a framework to evaluate overheated and underheated market conditions.

· Overheated (Warm colors): MVRV trades above +1SD

· Underheated (Cool colors): MVRV trades below -1SD

The price of Bitcoin recently broke above the +1σ range, reaching $89,500. This indicates that investors currently hold a statistically significant unrealized profit, suggesting an increased likelihood of profit-taking activity.

However, historically, the market has stayed in this overheated state for extended periods, especially when there is sufficient capital inflow to absorb selling pressure.

Extreme Long-Term Holder Spending

During the market cycle's euphoric phase, the behavior of long-term investors becomes crucial. LTHs control a significant portion of the supply, and their spending dynamics can greatly influence market stability, eventually forming local and global tops.

We can use the NUPL indicator to assess the realized profits held by LTHs, which is currently at 0.72, slightly below the threshold of 0.75 signaling from Belief (green) to Euphoria (blue). Despite a significant price increase, compared to previous cycle tops, the sentiment of these investors remains relatively low, indicating there may still be further room for growth.

As Bitcoin surpassed $75,600, long-term holders with 14 million Bitcoin fully transitioned into profit, prompting an accelerated spending. Since the ATH breakout, this has led to a balance decrease of +200k BTC.

This is a classic and recurring pattern where, as long as the price trend is strong and demand is sufficient to absorb profits, long-term holders begin to take profits. Because LTHs still hold a significant amount of Bitcoin, many of them are likely waiting for higher prices before releasing more Bitcoin back into circulation.

We can use the Long-Term Holder Spending Binary Index to assess the strength of LTHs' selling pressure. This tool evaluates the percentage of days in the past two weeks when group spending exceeded its accumulation, leading to a net decrease in their holdings.

Since early September, as Bitcoin's price has risen, long-term holder spending has steadily increased. With the recent surge to $93,000, this index has reached a value indicating that out of the past 15 days, 11 days saw a decline in LTH balances.

This highlights the growing distribution pressure from long-term holders, although it has not yet reached the levels observed around the peaks in March 2021 and March 2024.

After identifying the spending behavior of long-term holders (LTH) in an uptrend, we can turn to the next tool to delve deeper into their activity around key market points. The interplay between profit-taking and unrealized gains helps highlight their role in shaping cycle transitions.

This chart visually displays:

· LTH Realized Price (blue): The average acquisition price of long-term holders.

· Profit/Loss Price Range (blue): Represents the range of extreme profits (+150%, +350%) and losses (-25%), which typically trigger significant spending activity.

· Profit-Taking (green): Phase where long-term holders hold over 350% profit and increase spending.

· Sell-Off (red): Phase where long-term holders are in a -25%+ loss state with high spending.

Bitcoin's price has surged to over a 350% profit range (around $87,000), prompting significant profit-taking behavior by this group. As the market rallies, distribution pressure may increase, and these unrealized gains will also expand accordingly. This historically marks the onset of the most extreme phase of the previous bull market, with unrealized gains surging to over 800% in the 2021 cycle.

Institutional Buyers

Now, let's shift our focus to the role of institutional buyers in the market, particularly through the U.S. spot ETF. In recent weeks, ETFs have been a primary source of demand, absorbing most of the selling pressure from LTH. This dynamic also underscores the growing influence of institutional demand in shaping the modern Bitcoin market structure.

Since mid-October, weekly ETF inflows have surged to between $1 billion and $2 billion per week. This represents a significant rise in institutional demand and is one of the most pronounced periods of fund inflows to date.

To visualize the balance of LTH sell pressure and ETF demand, we can analyze the 30-day changes in Bitcoin balances for each group.

The chart below shows that from October 8 to November 13, ETFs absorbed around 128,000 BTC, accounting for 93% of the 137,000 BTC net sell pressure exerted by LTH. This highlights the critical role of ETFs in stabilizing the market during periods of increased selling activity.

However, since November 13, LTH selling pressure has started to exceed ETF net inflows, which echoes a pattern observed in late February 2024, when supply-demand imbalance led to increased market volatility and consolidation.

Summary

Bitcoin's rise to $93,000 has been supported by strong capital inflows, with approximately $62.9 billion in capital flowing into the digital asset space in the past 30 days. This demand has been driven by institutional investors led by the US spot ETF, even as capital flows out of gold and silver.

ETFs have played a crucial role, absorbing over 90% of long-term holder selling pressure. However, as unrealized profits reach more extreme levels, we can expect LTH spending to increase, with its inflow surpassing ETF inflows in the short term.

Original Article Link

欢迎加入律动 BlockBeats 官方社群：

Telegram 订阅群：https://t.me/theblockbeats

Telegram 交流群：https://t.me/BlockBeats_App

Twitter 官方账号：https://twitter.com/BlockBeatsAsia