• The Difference Between Bitcoin’s Market Cycles in 2017 and 2021

  • A comparison of Bitcoin market cycles shows that institutional investments are on the rise in the current cycle of 2021, as opposed to the cycle of 2017.

    This analysis examines some of Bitcoin’s structural market metrics and compares the current cycle to the 2017 cycle.

    The NVT of Bitcoin

    Using its on-chain investor volume, NVT estimates the network’s value. NVT Price is calculated by multiplying on-chain volume by the 2-year median value of NVT-Ratio (Market cap / Total on-chain transfer volume), as introduced by crypto analyst Willy Woo.

    After reaching the cycle’s apex in 2018, the 30-day and 90-day moving averages of the NVT-price fell steadily for nearly a year. However, since the 50% drop in May 2021, these moving averages have risen to levels higher than their previous peaks of 64K.

    This variation in NVT-based pricing results could imply a higher level of institutional activity compared to retailers.

    On-Chain Activity Categorical Analysis

    Historically, the 7-day MA of on-chain transfer volume Mean & Median sizes have spiked up to over 4X their 360-day MA level and then dropped below 1X their 360-day MA level in all previous crypto market cycles.

    The Mean and Median size of on-chain transfer volume are proxies for larger and smaller transactions, respectively. When the Mean value rises, it indicates that high-volume transactions are becoming more common. In contrast, median size is a proxy for small transactions attributed to retailers.

    Surprisingly, there hasn’t been a spike of more than 4X. Furthermore, the Mean value has always correlated with the Median, indicating that activity levels for both large and minor retailers were increasing as prices rallied to the new ATH, reaching more than 4X of their 360-day MA.

    Surprisingly, there is a significant difference between the Median and Mean values. This divergence also highlights the larger entities’ footprint in this ecosystem, each with a distinct conviction and vision.

    Bitcoin’s Fund Flow Ratio: Are Insitionals Here?

    Following the discussion of large entities’ apparent footprints above, another valuable on-chain metric known as Fund Flow Ratio can be studied to evaluate this assumption.

    Institutional investors are increasingly withdrawing their assets from exchanges (on-chain). As a result, the Fund Flow Ratio (on-chain transfer volume that is not sent to/withdrawn from exchanges divided by total on-chain transfer volume) can be used to determine the category’s weight. Examining the historical trend of this ratio reveals that it fell after reaching the ATH and entering the bear market.

    Despite the 50% market correction in May, this ratio has been increasing since January 2021. Almost 96 percent of on-chain transactions are not attributed to withdrawals/deposits from exchanges. The simple conclusion is that institutional participation in crypto markets is growing.

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