According to Reflexivity Research, Bitcoin’s performance this year is resembling that of its previous 4-year market cycles, indicating the potential beginning of another bull market. The market analysis firm recently released a report that explores the factors driving Bitcoin’s strong performance in the second quarter of the year. The report focuses on both market structure and on-chain data to understand the reasons behind Bitcoin’s success.
Events Driving Bitcoin’s Success
The report highlights two critical events that have contributed to Bitcoin’s current success. First, in March, Silicon Valley Bank (SVB) experienced a banking crisis, which created a favorable situation for Bitcoin. Second, BlackRock’s filing for a Bitcoin Spot ETF in June has also benefited the digital gold. This has resulted in Bitcoin now representing over 50% of the total market cap of cryptocurrencies. Prominent figures such as Michael Saylor predict even greater highs for Bitcoin, as regulatory crackdowns push capital away from alternative cryptocurrencies.
Rising Interest in Bitcoin in the United States
Bitcoin’s popularity is particularly evident in the futures market, where Bitcoin perpetual futures show a clear divergence from Ether perpetual futures. The interest in Bitcoin is mainly coming from the United States, where BlackRock’s filing for a Bitcoin spot ETF could potentially become the nation’s first official one. The report notes that most of Bitcoin’s performance has occurred during US trading hours since the asset manager’s submission. Furthermore, Bitcoin CME futures open interest has increased by $1 billion since the filing, indicating higher activity among US firms.
Network Data and Long-Term Holders
The report also examines network data and highlights the significance of Ordinals. The number of total Ordinals inscriptions is approaching 15 million, generating an additional $56 million in fees for miners. Moreover, this quarter marks the first time that the number of Bitcoin addresses holding over 1 BTC has surpassed 1 million. During this period, the Bitcoin network settled approximately $2 trillion in transactions.
Similar to findings from other firms like Glassnode and Santiment, Reflexivity Research points out that Bitcoin’s supply held by long-term holders is relatively high. This suggests that market participants are not planning to sell their coins anytime soon. The report emphasizes the potential impact of approved ETFs on Bitcoin’s demand, as the combination of increased demand and limited supply could have significant effects.
However, the report also acknowledges the possibility of a black swan event that could disrupt the current bull cycle. Although it appears to be the early stages of the bull cycle, there is still a chance of retesting cycle lows similar to the events in March 2020.
In summary, Bitcoin’s recent performance aligns with previous market cycles, indicating the potential start of another bull market. The favorable events surrounding Silicon Valley Bank and BlackRock’s Bitcoin Spot ETF filing have contributed to Bitcoin’s success. The rising interest in Bitcoin, particularly in the United States, is evident in the futures market and increased activity among US firms. Network data highlights the growth of Ordinals and the increasing number of Bitcoin addresses holding significant amounts of BTC. However, despite the positive trends, the report acknowledges the possibility of unforeseen events that could impact the current bull cycle.