Analysts: There is a speculative rush on the crypto market

The dynamics of capital flows, exchange activity, leverage in crypto derivatives and demand from institutions all indicate a jump in risk appetite among Bitcoin investors. Glassnode came to this conclusion.

The risk appetite for #Bitcoin investors are increasing, with growing signs of speculation appearing across capital flows, exchange activity, derivatives leverage, and even institutional demand.

Discover more in the latest Week On-Chain below👇https://t.co/4hL2kqpzOo pic.twitter.com/QdjnBuOtm7

— glassnode (@glassnode) February 27, 2024

Analysts noted that the consolidation around $52,000 before the surge to $59,000 was supported by fresh capital inflows. This was reflected in an increase in the realized capitalization metric by $30 billion since the beginning of the year. The indicator reached a level of $460 billion, which is only 3% lower ATH.

Even before the new round of the rally, the unrealized profit of the “average” holder reached 120%, the highest since November 2022. Such a high value was observed only in 1126 out of 4965 (22.7%) trading days, based on the analysis MVRV.

Analysts reviewed the SOPR indicator to estimate the average realized profit or loss by category of market participants:

• 🟠 average market SOPR: 1.13 (+13%);
• 🔵 SOPR for hodlers: 2.07 (+107%);
• 🔴 SOPR for speculators: 1.02 (+2%).

As with MVRV, the current situation corresponds to the most euphoric phase of the 2017 and 2021 bull markets.

As a measure of trading activity and speculation, experts also looked at the dynamics of flows to crypto exchanges.

Cumulative deposits and withdrawals reached a “staggering” $5.57 billion, compared to the all-time high of $6.2 billion.

Having segregated exchange deposits into separate categories, experts obtained the following values:

• 🔴 short-term holders +$2.1 billion;
• 🔵 long-term investors +$120 million;
• 🟢 transactions between platforms +$354 million.

Since mid-January, the daily volume of coin receipts from short-term players in value terms has exceeded and remains stable at $2 billion. At the moment, the figure reached a new ATH ($2.46 billion). According to analysts, the figures highlight the high degree of speculative interest.

The conclusion about the rush of buyers is also supported by the dynamics of the relative share of coins sent by short-term traders to centralized platforms. On a one-day basis since October 2023, the figure has increased from 1%+ to the maximum since the sale in March 2020 of 2.36%.

According to experts’ calculations, a record 78.3% of the total transaction volume on the network is associated with crypto exchanges.

Spot Bitcoin ETFs resulted in an “incredible” net inflow of 90,000 BTC. As a result AUM Product issuers increased by $5.7 billion to $38 billion.

Signs of a speculative mood also appeared in the crypto derivatives market. The total open interest (OI) in Bitcoin futures reached $21 billion. Only 7% of trading days had a higher value. In dollar terms, the OI has approached the euphoric levels of 2021.

In the options market, OI jumped to $17.8 billion, almost on par with the futures market. At that moment, the metric reached a new ATH of $20 billion.

In the perpetual contract market, annual funding costs jumped from 3% to 14.7%.

Analysts have found several explanations for this:

• traders are willing to pay much higher interest rates to use leverage;
• a short seller can now get two to three times the “risk-free” rate compared to US Treasury bills;
• such attractive yields can encourage market makers to return, increasing market liquidity.

Separately, experts noted a significant increase in the liquidation of short position holders. Over the past 30 days, the figure has exceeded $465 million.