Bitcoin Price Rally Aligns With ‘Healthy Uptick’ in On-chain Metrics

“Bitcoin has seen one of the most explosive weekly rallies in history,” Glassnode says

article-image

Source: Shutterstock / Andrew Derr, modified by Blockworks

share

A shift away from quantitative tightening and a fresh expansion of the US Federal Reserve’s balance sheet has industry majors bitcoin (BTC) and ether (ETH) riding high.

Both assets are now up 69% and 49.5% on a year-to-date basis to around $28,000 and $1,800  respectively, Blockworks Research data shows. In just the past couple weeks, they have rallied some 35% and 26% on the back of Silicon Valley Bank’s historic failure.

The crypto market performance is now vastly outstripping tech and growth stocks listed on the Nasdaq exchange by more than five times over the same period.

“Crypto, at a macro level, trades on the perceived fundamentals of the money supply outlook more so even than pure market beta,” Rich Falk-Wallace, CEO of data analytics firm Arcana told Blockworks. “As the money supply picture has changed overnight, so have crypto sector asset prices.”

Last year’s regime of quantitative tightening was a more significant factor affecting prices than the demise of many centralized crypto firms, digital asset trading firm Cumberland said via social media on Tuesday.

Ethereum’s Merge and Russia’s war in Ukraine were of lesser consequence for price, the firm said.

Bank liquidity driving bitcoin adoption

Now, as the Fed has taken swift action to prop up the US banking sector through its newly created Bank Term Funding Program in a step designed to “safeguard deposits,” investors are seeking out alternatives.

The central bank is weighing whether to hike rates further as it attempts to wrestle with inflation, though, amid the backdrop of liquidity provisions for banks, that is proving somewhat difficult.

Markets are now pricing in a 25 basis point jump instead of the previously conceived 50, to be decided at the next upcoming FOMC meeting on Wednesday, according to CME Group’s FedWatch tool

The easing of further rate hikes would be the first time the Fed has made such a move since it began its aggressive campaign in March of last year.

Sunday also saw the announcement from central banks around the world to bolster liquidity provisions in US dollars as they sought to soothe the crisis of confidence in the global financial system.

“None of this is exactly quantitative easing the way we’re used to it, but it’s clear that quantitative tightening is not just ending but headed in the other direction,” Cumberland tweeted.

Bitcoin and ether are easily outperforming major indexes so far this year

Whatever you term it, the actions are translating to further upside for digital assets, Glassnode said in its weekly video report, Tuesday.

Exploring the underlying strength of the trend, Glassnode pointed to several on-chain activity metrics in an attempt to analyze the fundamentals backing the rally.

Looking at the transaction counts, new addresses and new entities for bitcoin over a monthly basis versus its yearly average performance, Glassnode said the data was showing a “very healthy uptick.”

“Bitcoin has seen one of the most explosive weekly rallies in history,” Glassnode wrote in a slide at the end of its presentation. While there were some signs of profit-taking at play, it remains “relatively light” with respect to older coins, hinting at a strong conviction to the upside, it said.

Cumberland agrees: “The flow we are seeing on the OTC desk is reflecting the new reality. It has been extremely focused in BTC and ETH, and we’re seeing very little profit-taking, despite the fact that BTC is up 70% on the year; our flow ratio right now shows roughly twice as many buyers as sellers.”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

AERODROME TEMPLATE.png

Research

Aerodrome is a "MetaDEX" that combines elements of various DEX primitives such as Uniswap V2 and V3, Curve, Convex, and Votium. Since its launch on Base, it has become the largest protocol by TVL with more than $495M in value locked, doubling Uniswap's Base deployment.

article-image

And a look into the newest name on the Trump ticket: Sen. JD Vance

article-image

Plus, Imran Khan’s intriguing experiment on the speeds of crypto onramps

article-image

The SEC has signaled a timeline to issuers that could lead to a July 23 launch for the ETH funds, people close to the process told Blockworks

article-image

PayPal has unequivocally made a name for itself as a crypto adopter among fintech giants

article-image

Also, a look into how the highly-debated SAB 121 could end up shaking out for crypto custodians

article-image

Vance, an Ohio Republican, is largely seen as crypto-friendly