- Glassnode says surging spot trading volumes and robust exchange flows mark new phase.
- In past cycles Bitcoin has dropped 10% or more even amid optimism.
- Euphoria period will eventually give way to a new stage, research shows.
Cue the euphoria.
With Bitcoin blowing past $70,000 earlier this week, investors are optimistic that the bull market is just getting started.
That’s the take from data provider Glassnode, which said Monday that surging spot trading volumes and robust exchange flows have ushered in a new stage in the market cycle.
“Wealth is approximately balanced between long-term holders and new demand, suggesting the ‘euphoria’ phase is still relatively early from a historical perspective,” Glassnode wrote in a report.
Reason for caution
Still, there is reason for caution given crypto’s volatility.
In prior euphoric periods, prices have dropped more than 10% and even 25% even as optimism was running full tilt, the data provider said in a report.
Data shows that this market cycle has only experienced two corrections of approximately 10% or more this year, one in mid-March and another at the beginning of April.
Bitcoin was trading at just north of $69,000 in mid-morning trading UK time on Wednesday.
Euphoria in the cryptocurrency market typically signals a peak in optimism, with investors showing increased confidence in future price movements, Glassnode said.
Looking at past trends, the current excitement in the market is likely just beginning, Glassnode said.
Such phases are often characterised by significant increases in trading activity and a general willingness among investors to take on more risk in anticipation of higher returns.
“I think we’re probably in the fourth to sixth inning,” David Lawant, head of research at FalconX, told DL News. “It doesn’t mean it can’t get rocky sometimes, though.”
The surge in Bitcoin’s value over the last year has been significantly bolstered by heightened spot trading activity and an uptick in the movement of Bitcoin across exchanges, Glassnode wrote.
Peak trading
Daily trading volumes peaked at $14.1 billion for Bitcoin in mid-March, mirroring the peak trading activity seen during the 2020-2021 bull market, the analysis found.
The market has been influenced by the launch of US spot exchange-traded funds for Bitcoin on January 11, which broadened investor participation.
Following the euphoria phase, the market typically moves into the distribution phase, where early investors start selling their holdings to take profits.
This leads to increased volatility and a shift in market sentiment from optimism to caution.
Recent weeks have seen a cooling off, with volumes adjusting to around $7 billion daily (down from $14 billion), hinting at a possible moderation in market activity, Glassnode said.
Sebastian Sinclair is a markets correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com.
