Grayscale Believes Crypto Bull Cycle Is 50% Complete

Coinrule

One of the hardest parts of investing in crypto is “timing the top”. “A new paradigm”, “the super cycle” and “this time is different” themed X threads are written to keep you accumulating for the “next leg up”. However, Grayscale believes we are not there yet and detailed why in a report they released last week. 

Making up over 50% of the total crypto market cap, there is a belief that Bitcoin and its 4-year halving cycles influence crypto’s market cycles. The halving acts as a bullish event for Bitcoin because it halves miner rewards and their potential selling pressure. In previous cycles, halvings have marked the beginning of bull runs. Until now, no previous cycles have seen Bitcoin break new all time highs before halving. Grayscale acknowledges the main catalyst for the pre-halving price surge has been the Bitcoin spot ETFs, with total net Inflows for the ETFs standing at over $12 billion within 3 months. 

It appears holders anticipate higher prices. Bitcoin’s exchange reserves are the lowest they have been in 5 years at only 12% of the circulating supply. The net unrealised profit and loss ratio, that tracks holders’ overall profitability, is currently at 60% with previous highs being ~70%. These indicate holders are not satisfied with their gains and may hold for higher prices. The market value to realised value Z-score metric is currently below 3, with anything over 7 being the danger zone. Last cycle’s Z-score peak hit over 7 as Bitcoin climbed to over $60,000. This suggests we still have a climb to experience any truly manic prices. Stablecoin liquidity also increasing hints there may be some participants with capital waiting and ready to invest. 

The report further highlighted that the demand so far isn’t coming from retail. This is a surprise considering meme tokens had record DEX trading volumes of over $260 billion in March. However, this could be due to the increasing risk appetite of active participants. Along with them positioning themselves ahead of a retail surge. Google search results for “crypto” are currently 44% of May 2021 highs. Crypto YouTube viewership and subscriptions are increasing, but far below peak 2021 levels. 

Perfection is the enemy of good, and when the time comes, selling slightly early or late is the best, most realistic outcome. Independently, these metrics may not provide extreme insight of when to sell, but used in combination they may give a clearer picture. Grayscale, however, believes now is not the time to press the red button.