Bitcoin (BTC) recently broke through the $50,000 mark, reaching levels not seen since December 2021. The cryptocurrency has continued to climb, currently trading above $51,900. Analysts at CryptoQuant attribute this surge in price to the high demand generated by recently approved spot Bitcoin exchange-traded funds (ETFs).
With an estimated 75% of new investments in Bitcoin coming from ETFs, excluding Grayscale’s GBTC, the market cap of Bitcoin has reached $1 trillion. The realized capitalization stands at $454 billion, just shy of its all-time high of $468 billion in April 2022. This metric, which measures the amount of money invested in the Bitcoin ecosystem, indicates a bullish outlook for the mid-term.
The rapid increase in realized capitalization, with a $71 billion boost in the past year, points towards a surge in investment flows and a potential price increase for BTC. The amount of new money flowing into Bitcoin is at its highest annual rate since mid-2022, signaling growing interest in the cryptocurrency.
The impact of spot Bitcoin ETFs on BTC is evident in the substantial inflows entering the market through these investment products. According to analysts, $9.5 billion, representing 2% of the total historical investments in Bitcoin, has come through ETFs. While this influx is positive for price gains, any easing of demand or outflows from ETFs could pose a risk to Bitcoin’s price.
Despite the surge in Bitcoin’s price, CryptoQuant has set a short-term price target of $56,000 based on network activity valuation. This target is derived from the Metcalfe Price Valuation Band, which assesses BTC’s price based on active user addresses. The Metcalfe band has historically signaled resistance levels in the past, suggesting a potential correction risk at certain price points.
Currently, Bitcoin’s unrealized profit margins remain relatively low at around 17%, compared to 30%-40% when the ETFs first started trading a month ago. This indicates that there is still room for Bitcoin’s price to increase further, as the cryptocurrency’s value continues to be supported by strong demand from ETFs and growing investment flows.
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