Source: Glassnode; Compiled by: Baishui, Golden Finance

Abstract

Bitcoin has developed into a global asset with extremely strong liquidity and is available 24/7. This creates conditions for investors to speculate, trade and express macroeconomic views when traditional markets are closed.

Bitcoin continues to prove itself as an emerging store of value asset with cumulative net capital inflows of more than $850 billion. It also acts as a medium of exchange assets, processing nearly $9 billion in transaction volume every day.

The multiple indicators of new demand are still high, but they are well below the peaks of previous cycles.

The composition of digital asset investors is also changing, with the increase in more mature institutional investors in the Bitcoin field significantly. This leads to a general decline in the retracement magnitude, and volatility compresses over time.

Proving Ground

Since its birth in 2009, Bitcoin has developed into a highly liquid global asset and remains active around the clock. Given that global events usually occur outside of traditional market trading hours, this makes Bitcoin one of the few assets that investors can express their views on weekends, etc.

Bitcoin experienced a sharp decline over the weekend as market participants responded to Trump’s tariffs on Mexico, Canada and the imposition of tariffs. Bitcoin and other digital assets experienced a sharp decline as other markets closed, then rebounded:

BTC trading price fell from $104,000 to $93,000 (-10.5%), and then rebounded to $102,000 .

ETH trading price fell from $34,000 to $25,000 (-26.5%) before rebounding to $28,000.

SOL trading price fell from $236 to $184 (-22.0%) before rebounding to $217.

Bitcoin is now playing an increasingly important role on the world stage. The Kingdom of Bhutan and other countries are carrying out large-scale mining operations, and El Salvador is pushing Bitcoin to become a fiat currency. , while the United States is considering the potential of Bitcoin as a strategic reserve asset.

Bitcoin has now broken through an important psychological barrier of $100,000 for weeks, and many critics believe it is an impossible feat.

While traditional investors' acceptance of Bitcoin is increasing, Bitcoin remains a controversial and polarized topic for many, usually Based on suspicious claims of lack of intrinsic value or utility.

Nevertheless, Bitcoin has consolidated its position as one of the world's largest assets, with a market capitalization of $2 trillion, ranking the seventh largest asset in the world. It is worth noting that this puts Bitcoin in a position higher than silver ($1.8 trillion), Saudi Aramco ($1.8 trillion) and Meta ($1.7 trillion),Making it increasingly difficult to ignore.

As the valuation and weight of an asset reach such a large scale, its inertia will also increase. The ripple effect is that Bitcoin now needs a large inflow of new capital to achieve sustained growth in its market capitalization. To explore this idea, we can use the implemented market capitalization indicator, which measures the cumulative net inflow of capital into digital assets.

If we base our cyclical lows set in November 2022, at the time of achieving a market capitalization of $400 billion, Bitcoin has absorbed approximately $450 billion in additional capital inflows since then, More than twice the market value it has achieved.

This reflects the total value of “storage” in Bitcoin is approximately $850 billion, and each token is priced based on its last time it was traded on the chain.

While BTC is often regarded as an emerging store of value asset, the Bitcoin network can also serve as a decentralized orbit of BTC as a medium of exchange. The combination of nodes and miners allows any individual or entity to settle payments across borders without the interaction of third-party intermediaries.

When using Glassnode’s entity-adjusted heuristics to screen transactions, the Bitcoin network processed an average of $8.7 billion per day over the past 365 days, with the total value of transfers in the past year reaching $3.2 trillion.

The actual market value and economic volume of Bitcoin network settlement provide empirical evidence that Bitcoin has both "value" and "utility", challenging critics that Bitcoin has neither value nor utility assumptions.

Relative Dominance

After determining the growing importance of Bitcoin as a macro asset, we can shift our focus internally and analyze its relative to the broader digital asset ecosystem Dominance of the system.

Bitcoin’s dominance has been on a sustained upward trend since the FTX crash in November 2022, rising from 38% to 59%. This shows that in the digital asset space, the net rotation and value accumulation of Bitcoin take precedence over other assets.

This may be partly attributed to the wider access provided by U.S. spot ETFs to institutional capital. Bitcoin, as a scarce asset, has a clearer core narrative, and many people hold Bitcoin as a currency to hedge the depreciation of global fiat currencies.

When we compare the market caps of Bitcoin and various altcoins (excluding Ethereum and stablecoins), we can see that the difference in valuation is expanding. Once again anchoring ourselves to the 2022 lows, we can compare the growth in market cap.

Bitcoin market value: $363 billion > $1.93 trillion (5.3 times)

Altcoin market value: $190 billion > $892 billion (4.7 times)

Although there are differences in the valuation scale of Bitcoin and altcoins, the correlation between the two is still strong. This shows that the reason for this difference is not the growth rate between the two, but the huge difference in capital entering Bitcoin relative to capital entering the altcoin field.

While Bitcoin continues to acquire most of its capital from investors, it is expected that Bitcoin’s dominance will continue to climb (the reversal of this indicator is a signal that capital rotates in another direction).

Where are the new requirements?

As BTC prices break through the $100,000 mark, people expect Bitcoin exposure to increase significantly. We can evaluate this by evaluating the percentage of network wealth that tokens purchased less than 3 months ago. The following chart plots the changes in this indicator over the 12 months after breaking through the new cyclical ATH.

While new demands in this cycle make sense, the wealth held by the 3-month-old token is much lower than the previous cycle. This shows that the scale of new demand inflows is not the same, and seems to be bursts and peaks rather than continuous.

Interestingly, all previous cycles end about a year after the first ATH breakout, highlighting the atypical nature of our current cycle, which first reached a new ATH in March 2024 .

If we list the transfers of small wallets (less than $10,000) separately, we can see a significant drop compared to the highest level in 2021. This is still the case despite a significant increase in overall settlement volume this cycle and a significant increase in Bitcoin price.

This suggests that new demand for BTC is dominated by large entities rather than small retail entities.

We can also use other datasets to support our argument. Despite the many favorable factors in the asset, the search intensity has not yet reached the fanatical level during the 2021 bull market.

The evolving investor base

Although the structure and consensus code of the Bitcoin protocol are basically fixed, the market's response to it is a constantly evolving and dynamic process. The regulatory environment is changing, and new financial instruments such as derivatives and ETF products continue to grow around it. As the Bitcoin environment develops, the composition of Bitcoin investors is constantly changing, which is most obvious in this cycle.

When comparing the balance changes of smaller entities (retail investors holding <10 BTC), we noticed significant changes in behavior patterns in recent years.

During the 2013 and 2017 bull markets, we can identify periods of large amounts of token accumulation from these groups, which is often synonymous with “excited top buy”. This pattern seems to break the cycle, with smaller entities accumulating more intensely during adjustments and callbacks, then passing as the market rebounds to new highsFly to the allocation.

This suggests that even among those investor groups that are often considered retail investors, there is a more mature and well-educated investor group.

The launch of US spot ETF Bitcoin tools also provides institutional investors with new investment channels, providing them with regulated Bitcoin investment opportunities. This has facilitated potential institutional capital flows, with net inflows of ETFs exceeding $40 billion in 12 months since its launch and total asset management exceeding $120 billion.

If we dig into the IBIT investor capital statement (as described by analyst TXMC), we can clearly see signs of increased demand for institutional investors. This further proves that Bitcoin is attracting an increasingly mature investor community.

One of the many advantages of controlled downside data on chain is that it can help us analyze investor behavior during stressful periods such as pullbacks and downsides.

When we evaluate the actual loss magnitude of locked during a bull market, our current cycle remains the most conservative. The only prominent event in which bitcoin holders suffered a significant loss was the yen arbitrage closing on August 5. In addition, the loss is still relatively small, indicating that the investor group is more patient, resilient, and insensitive to price.

This is very different from the previous cycle structure. The 2015-2018 cycle is characterized by multiple local selling periods. The 2019-2022 period was even more turbulent, with several deep and serious sell-off events such as the PlusToken closing in mid-2019, the COVID-19 sell-off in March 2020, and the massive miner migration in mid-2021.

Bitcoin's volatility situation is also in a state of change, with the actual volatility at a historical low in the bull market. The actual volatility of this cycle is usually below 50%, while in the first two bull markets, the actual volatility is often above 80% to 100%.

This situation of reduced volatility, coupled with a relatively calm investor base, is reflected in a more stable price structure. So far, the 2023-25 ​​year cycle has basically been a series of step-by-step price trends (after the rise, the consolidation period).

We also see a more controllable pullback, with the current cycle experiencing the shallowest average pullback since local highs in all cycles so far.

Summary

Bitcoin continues to establish its position as a global macro asset. It is always available for trading, allowing investors to express their market perspectives at any time of the day, while its deep liquidity enables investors to execute large-scale transactions.

The network has attracted more than$850 billion in net capital inflows while processing nearly $9 billion in transaction volume every day. These data largely eliminate doubts about these claims.

Recent regulatory changes in the digital asset ecosystem have prompted changes in the composition of investors, leading to an increasing number of mature institutional investors in the Bitcoin market. This more patient, more resilient and less price-sensitive investor group helps reduce retracement and reduce volatility.