Is the Crypto Bull Run Back for Good?

Grayscale's recent report suggests that the crypto market is amidst a bull run, supported by fundamental and technical indicators. The precursors to this bull run include a surge in Bitcoin's dominance, positive stablecoin inflows, and decreasing BTC balance on exchanges. While the market is currently in the "mid-phase" or "fifth inning" of the bull, indicators such as the Net Unrealized Profit/Loss ratio and a subdued retail sentiment suggest that there is still room for growth. However, investors are advised to monitor spot Bitcoin ETF inflows and broader macroeconomic factors for potential market shifts.

Is the Crypto Bull Run Finally Here?

According to Grayscale, a recent report suggests that the crypto market is "presently in the middle of the bull run," fueled by a trifecta of fundamental and technical factors.

Precursors to the Crypto Bull Run

Grayscale analysts claim that Bitcoin's dominance acts as an early indicator for the broader crypto market. As investors seek higher returns, a surge in Bitcoin's price often precedes a rally in altcoins. In the 2021-2022 bull run, Bitcoin's gains were swiftly followed by a boom in altcoin valuations.

This time around, Grayscale identifies three unique catalysts:

• Spot Bitcoin ETF inflows: Since their approval in January 2024, capital flows into spot Bitcoin ETFs have consistently exceeded Bitcoin issuance, putting upward pressure on prices.
• Stablecoin inflows: Growing stablecoin liquidity indicates ample capital for trading, fueling the momentum of bull markets.
• Decreasing BTC balance on exchanges: The transfer of Bitcoin from exchanges to cold wallets for long-term storage suggests a supply squeeze, driven in part by spot Bitcoin ETFs.

Is the Bull Market Here to Stay?

Grayscale uses the term "mid-phase" or "fifth inning" to describe the current stage of the bull run. The Net Unrealized Profit/Loss (NUPL) ratio, which measures profit/loss as a percentage of market cap, has risen alongside Bitcoin's price, indicating that investors are holding onto their coins. While NUPL is approaching 60%, historical peaks have occurred at ratios above 70%, suggesting a potential cycle high.

Retail Investors: In or Out?

Bull markets are known for their euphoria, FOMO, and retail participation. However, data from Satiment and Google Trends reveals that retail investor interest is subdued compared to the 2021 bull market. This raises questions about their participation in the current cycle.

Yet, data from Alternative shows that market sentiments are similar to those seen at the peak of the 2021 bull market. This could signal the return of retail investors, driven by greed and FOMO, which could further boost prices.

Grayscale's Conclusion

Based on these technical and fundamental factors, Grayscale believes that "the bull run will persist." However, investors are advised to monitor spot Bitcoin ETF flows and macroeconomic factors for any signs of market shifts.

Cautious Optimism

Grayscale acknowledges that while progress has been made, there is still room for the bull run to continue. However, they caution investors to exercise caution and monitor the market closely for any potential changes.