Currently, the price of Bitcoin continues to consolidate not far below its historical peak, and long-term investors have begun to accumulate Bitcoin assets again for the first time since December 2023. At the same time, as the first batch of Ethereum spot ETFs were historically approved for listing in the United States, the price of Ethereum rose by 20% accordingly.
Although the prices of Bitcoin and Ethereum have been trading sideways with small fluctuations since March, the markets for both assets have shown relative strength after a long period of consolidation following historical price peaks. The U.S. Securities and Exchange Commission (SEC)’s approval of an Ethereum spot ETF surprised the market, causing ETH prices to rise by more than 20%. - Net flows of U.S. Bitcoin spot ETFs turned positive again after four weeks of net outflows, indicating a recovery in demand from the traditional financial sector.
- Selling pressure from long-term holders has dropped significantly, while investor behavior has returned to an accumulation mode, suggesting that higher volatility is needed to fuel the next wave.
After reaching its lowest point since the FTX crash (-20.3%), Bitcoin price began to recover to its historical peak, reaching $71,000 on May 20. Compared to previous situations, the pattern of price retracements in the 2023-24 uptrend seems to be very similar to the retracements that occurred in the 2015-17 bull market.
The 2015-17 uptrend occurred during the early stages of Bitcoin, when there were no derivatives available to analyze the asset class. But now we can compare it with the current market structure, and the analysis shows that the 2023-24 uptrend may come mainly from the spot-driven market. The launch and inflow of US spot ETFs just support this assertion.
Figure 1: Bitcoin bull market adjustment retracement
Since the lows created by the FTX crash, Ethereum has seen significantly smaller corrections compared to previous cycles. This market structure suggests that market resilience is increasing to some extent between each successive pullback, while downside volatility is decreasing.
However, it is worth highlighting that Ethereum has been slower to recover relative to Bitcoin. Over the past two years, ETH has significantly underperformed compared to other top crypto assets, which is mainly reflected in the relatively weaker ETH/BTC ratio.
Nonetheless, the approval of an Ethereum spot ETF in the U.S. is a broadly unexpected development that could provide the necessary catalyst to spur strength in the ETH/BTC ratio.
Figure 2: Ethereum bull market adjustment retracement
If we consider the rolling performance of the Bitcoin market on a weekly, monthly, and quarterly timeframe, we can see strong overall performance, with gains of 3.3%, 7.4%, and 25.6%, respectively.
To highlight those periods of particularly strong price performance, we can count the number of trading days over a 90-day window where all three timeframes have experienced upward performance of more than 20%. So far, only five days have reached this threshold in the last quarter.
In previous cycles, this value was generally between 18 and 26, which suggests that the current market may be more cautious than historical bull markets.
Figure 3: Bitcoin quarterly, monthly and weekly market performance (historical analysis)
We can evaluate Ethereum within a similar framework and see the massive impact that the approval of an Ethereum ETF had - the news triggered almost immediate buy-side pressure, leading to the first price moves of more than 20% across all three timeframes since the end of 2021.
Figure 4: Ethereum quarterly, monthly and weekly market performance (historical analysis)
Figure 5: Bitcoin ETF flow & net inflow of issuing trading platforms (7-day moving average)
Figure 6: Bitcoin supply profitability
Figure 7: Bitcoin supply profit quarterly retracement
"Diamond Hands" Dominate the Market
(Note: "Diamond Hands" refers to investors who hold highly volatile financial assets and hold on to them even under extremely high selling pressure)
As prices rise due to new buying pressure, the importance of selling pressure from long-term holders grows. Therefore, we can measure the incentives to sell by evaluating the unrealized profits of the long-term holder group, and the actual sellers by evaluating their realized profits.
First, the MVRV ratio of long-term holders reflects their average unrealized profit multiple. Historically, the trading profits of long-term holders in the transition phase between bear and bull markets are above 1.5 but below 3.5, and this phase can last for one to two years.
If the market's upward trend continues and eventually forms a new historical price peak in the process, the unrealized profits of long-term holdings will expand, which will greatly increase their desire to sell and eventually lead to a certain degree of seller pressure, gradually exhausting the demand appearing in the market.
Figure 8: MVRV of long-term Bitcoin holders
To conclude this analysis, we will assess the spending rate of long-term holders through the 30-day net position change in supply from long-term holders. In March, when Bitcoin was heading towards a new all-time high, the market experienced its first major asset allocation from long-term holders.
Figure 9: Changes in long-term holders and Grayscale’s ETF holdings
Summarize