Retail Crypto Market Participation: What the Data Indicates

One of the biggest questions in the crypto industry is whether retail is participating in this current rally. Retail entrance often marks a sign of euphoria

Bitcoin has rallied by more than 40% over the past two months, putting the world’s largest cryptocurrency within 15% of its record high.

After bitcoin (BTC) price crashed out of the bull market in March of 2022, a number of analysts and investors began speculating that the bear market would end sometime in the second half of 2023.

Now that bitcoin is up 40% year-to-date, some are wondering if the recent rally is signaling that the bull market has returned early.

While bitcoin price action is certainly exhibiting signs of strength, and a number of analysts are growing increasingly bullish, several on-chain metrics suggest that retail investors are still largely on the sidelines.

Coinbase App Rankings Suggest Lack of Retail Interest

One key metric that can indicate the level of retail participation in the market is the ranking of crypto exchange Coinbase’s CCOIN app in the app store.

During the 2017 and 2021 bull markets, Coinbase became the number one downloaded app near those tops, and at bitcoin's recent market peak in March of this year, it ranked in the top 5,, according to @CoinbaseAppRankBot.

Coinbase App Rankings 2023 vs 2024 - March Peak

This year, however, Coinbase began the year ranked around 200, but slowly slid down to a low of 533 on May 23. Since then, the app has recovered slightly and currently ranks at number 438 in the finance category.

This recent low in Coinbase app rankings is not far above the all-time low for the year, which is around 500, and also not far from where the app was ranking during the bear market of 2022.

Coinbase App Rankings 2023 vs 2022 Bear Market

This continued lack of interest from retail investors is further supported by on-chain data, which shows that bitcoin short-term holders are largely underwater.

Investors who have bought bitcoin within the past 155 days are considered short-term holders (STHs). This group of holders tends to factor heavily into market tops, as those chasing the market usually begin buying as the price starts to climb.

In the past two bear markets, peaks in the short-term holder supply have coincided with market tops, and five recent major tops in BTC, going back more than a decade, have coincided with peaks in STH supply, according to on-chain data firm Glassnode.

Bitcoin Short Term Holder Supply Index (blue) vs Price (orange) Past 5 Major Tops - Glassnode

This metric is defined as the total supply last sold at a price within 15% of the current market price, and is used as a proxy for the supply that may react quickly to price changes.

Interestingly, this metric has been trending down throughout the current bull market rally, which began in early 2023. This indicates that those buying bitcoin as the price climbs are now at a loss.

Bitcoin Short Term Holder Supply Index (blue) vs Price (orange) 2024 Bull Market Rally - Glassnode

This recent decline in short-term holder supply is also supported by data from crypto analytics firm Santiment, which shows that realized losses have outpaced realized gains throughout the majority of the 2023 rally.

Bitcoin Realized Loss (red) vs Realized Gain (green) 2023 - Santiment

According to Santiment’s analysis, this metric tends to show a clear divergence at market tops, as realized gains typically begin outpacing realized losses.

This divergence is largely due to retail investors selling their bitcoin at a profit as the market nears a top, while institutional investors tend to hold on to their BTC throughout the bull market.

Relative Strength Index (RSI) also Shows Lack of Euphoria

Another metric that tends to factor into market tops is the Relative Strength Index (RSI), which is a momentum indicator that measures the magnitude of recent gains and losses in an attempt to gauge the strength of a trend.

This metric tends to reach extremes at market tops, as a high RSI reading indicates that an asset is overbought and due for a pullback.

Bitcoin Price vs Relative Strength Index (RSI) Past 5 Major Tops - Glassnode

In the past five major bull market rallies, RSI has reached a high of 85 or above at four of the market peaks, according to Glassnode.

Currently, however, RSI has reached a high of just 68 during the 2023 bull market, which is well below the levels seen at past market tops.

Bitcoin Price vs Relative Strength Index (RSI) 2024 Bull Market - Glassnode

This lower RSI reading is further supported by data from crypto analytics firm Coinglass, which shows that bitcoin options skew is remaining