What are the positive factors in the crypto market? How long will it take for BTC to reach a new high?

Author: UkuriaOC, CryptoVizArt, Glassnode; Compiler: Deng Tong, Golden Finance

Summary

• Bitcoin spot price briefly rose above $69,000 after successfully breaking through several important technical and on-chain pricing levels.

• From an on-chain perspective, all sub-coin age groups in the short-term holder population are now holding unrealized profits, which may be a driving force for market sentiment.

• However, speculation in the futures market is increasing, with open interest surging to a new ATH, much of which is attributed to cash carry trades.

Accelerating Price Action

Bitcoin spot price has seen an uptick this week, rebounding to $69,000, approaching the $73,000 ATH set in March. The market is trading just -6.8% below its peak, which has given many investors a sigh of relief after seven months of sideways volatility.

When we measure the depth of the retracement relative to the ATH over time, we can see that the severity of this retracement is more consistent with the 2021 up cycle and less consistent with the 2019 and 2022 bear markets.

We can further understand the market's resilience by comparing spot prices to key technical pricing levels. The rally saw the market break through the combined resistance of the 200DMA (green) and 111DMA (blue), which Bitcoin investors tend to react to.

Interestingly, the 365D SMA has historically acted as support or stubborn resistance at macro market inflection points. Most recently, the 365D SMA served as a strong support during the JPY carry unwinding on August 5, and it has defined the lower boundary of the current macro uptrend so far.

From a Fibonacci retracement level perspective, spot prices are primarily constrained between the ATH and -23.6%, acting as a general lower boundary for the overall range-bound price action.

It is extremely atypical for Bitcoin to trade in such a range for several months in a row, which highlights the uniqueness of this period of sideways and volatility. Typically, the Bitcoin market will rebound to new highs, or the sell-off will be more severe, which will trigger this period of consolidation.

Key On-Chain Pricing Levels

Net capital inflows into the Bitcoin asset have also accelerated, increasing by $21.8B (+3.3%) in the past 30 days. This has caused the realized cap to rise to a new ATH, reaching over $646B.

This suggests that liquidity is rising across the asset class, with meaningful capital inflows supporting price increases.

The AVIV ratio is a fundamental metric in the on-chain analyst’s toolkit that assesses the size of paper gains/losses held by active investors (by discounting losses and inactive entities such as long-dormant supply).

The AVIV ratio has been above its historical average year-to-date and rebounded strongly from that average when the yen carry trade unwound on August 5. Generally, this is a constructive signpost as it suggests that investor profitability remains relatively strong and that active investors have defended their cost base in recent months.

In addition, we note that the AVIV ratio has not breached the +1SD level since the ATH in March, highlighting the potential for growth if positive price momentum is established.

We can use key on-chain pricing levels to build a framework for thinking about Bitcoin market cycles. This can be thought of under the following framework:

Deep Bear Market: Price is trading below actual price. （Red）

Early Bull Market: Price is trading between the realized price and the true market mean. （Blue）

Enthusiastic Bull Market: Price is trading between the ATH and the true market mean. （Orange）

Euphoric Bull Market: Price is trading above the ATH of the previous cycle. （Green）

The price is trying to transition from the Enthusiastic Bull Market state to the Euphoric Bull Market state, which is characterized by continuous breakthroughs above the 2021 high of $69,000. This level was briefly broken during the March 2024 peak, but profit-taking was too severe at the time and it took some time to cool down investor excitement.

We can also assess the unrealized profit status of the short-term holder group, which can be considered as a proxy for the recent market buyer sentiment.

Currently, the spot price is above the average acquisition price of all short-term holder groups across sub-coin age groups. This means that almost all recent buyers are holding unrealized profits, highlighting the comfort this rally has brought to investors.

Total Leverage Increased

The Bitcoin derivatives market has experienced tremendous growth since the launch of the first perpetual swap instrument in 2016. Derivatives markets have significantly increased the depth and liquidity of the asset class, allowing for increasingly sophisticated trading and hedging strategies.

Open interest in perpetual and term futures contracts hit a new ATH of $32.9B this week, indicating a significant increase in total leverage entering the system.

While crypto holders prefer perpetual swap instruments, CME’s traditional term futures contracts have contributed significantly to the rise in open interest.

The product provides a new wave of institutional investors with regulated derivatives exposure and the opportunity to earn returns through cash holding strategies. Open interest in CME contracts has surged to a new ATH of $11.3B, highlighting the increase in institutional activity within the digital asset space.

However, trading volume across all futures contracts ($35B per day) remains somewhat subdued, especially when compared to volumes seen in March when the market peaked at an ATH. This suggests that trading activity has yet to gain significant momentum, and could hint at a higher dominance of single-trading basis strategies and arbitrage positions in the futures market. The yield earned through the cash holding strategy is about 9.6%, almost double the "risk-free" yield of short-term U.S. Treasuries. With further rate cuts from the Federal Reserve expected in the coming months, this basis trade is likely to continue to attract institutional traders, further expanding Bitcoin's market liquidity.

Further evidence of increased cash carry trading can be found by comparing the 30-day sum of ETF net flows with the 30-day change in CME open interest.

30-day sum of ETF net flows (orange)

30-day change in CME open interest (blue)

We can see the similarity between the two metrics, which suggests that there is a relationship between long spot positions through Bitcoin ETFs and short positions through CME futures contracts to gain benefits.

Summary and Conclusion

Positive market momentum in the Bitcoin market continues to develop, with the spot price breaking through several key technical and on-chain price levels. This has brought many investor positions back into a state of unrealized profit and could serve as a bullish factor for market sentiment.

Open interest in the futures market has also expanded recently, reaching a new high. CME’s dominance highlights the growing influence of institutional investors in the digital asset space and strongly suggests that cash-holding strategies are working.