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Bitcoin hits all-time high

In March 2024 we explore Bitcoin’s new ATH, key volatility drivers, speculative asset interest and ETF effects. Includes BTC halving insights and an update on Glassnode’s near-term momentum and risk framework.



Executive Summary

Monthly Overview: In February 2024, the Bitcoin market surged, driven by positive momentum, significant price gains, and new capital inflows (especially through U.S. spot Bitcoin ETFs such as BlackRock IBIT). Record ETF inflows and a reduction in loss supply reflect bullish investor sentiment, while speculative and strategic long-term holder allocations point to a balanced but speculative market landscape.

Market Momentum: March continued February’s strong positive momentum, pushing Bitcoin to new heights before encountering downside volatility and major liquidations. Profit-taking by long-term holders and the upcoming Bitcoin halving indicate market strength and increased volatility, providing traders with a combination of risk and opportunity.

Indicator Spotlight: The SLRV Ribbons indicator compares short-term Bitcoin trades to long-term holdings and is a key indicator of shifts in market momentum. A high SLRV ratio signals new capital inflows, while a low ratio suggests the long-term holder base is consolidating.




Monthly Market Overview

In February, the positive momentum of the digital asset market continued to increase, with prices rising rapidly, risk appetite rising, and new funds pouring in. ​

Bitcoin surged above $60,000, recording its largest monthly candle in history, with a gain of around $20,000. The rally was significantly driven by U.S. spot Bitcoin ETFs, particularly BlackRock’s IBIT, which saw record inflows and surpassed $10 billion in assets under management, making it the fastest ETF to reach this milestone one.

Additionally, the supply in losses has shrunk to just 13%, meaning overall investor sentiment has improved. Bitcoin’s realized cap has risen to over $480B, indicating strong and healthy capital inflows, with the market almost reclaiming ATH

The largest digital asset by market capitalization has also seen its fair share of speculative enthusiasm, as evidenced by increased inflows to exchanges and high open interest in futures and options markets. Directional short sellers bet against an uptrend, leading to massive liquidations. This speculation spans both directions, showing an increase in risk appetite among Bitcoin investors

As Bitcoin approaches its highest peak, long-term holders (investors who have held Bitcoin for at least 155 days) initiate distribution cycles, marking a transitional phase in which profits are increasingly locked in. This behavior is consistent with market tops, where long-term holders begin to allocate when prices approach or exceed previous highs. Notably, the new U.S. spot ETF played a crucial role in sustaining demand, offsetting sell-side pressure from these distributions, and supporting Bitcoin price resilience

Market dynamics are also affected by a clear shift of investor capital towards more speculative assets, with growing interest among investors in moving capital further up the risk curve. While Bitcoin and Ethereum still lead in terms of year-to-date gains (and market dominance), the rotation of capital into altcoins is evident, albeit currently concentrated in higher market cap assets like Solana, Polkadot, and the Cosmos ecosystem superior. Diversification of investor interest suggests the market is maturing and ready to explore beyond the established giants of the cryptocurrency world

In summary, the market in February 2024 was characterized by strategic institutional entry, healthy capital inflows as indicated by rising realized caps, and a strategic balance between speculation and long-term holding behavior. As the market gets closer to major events like the Bitcoin halving, traders, especially those focusing on momentum and directional strategies, should monitor these trends for opportunities.

March began with Bitcoin continuing the strong positive momentum seen in February, which propelled the currency above its previous all-time high. However, this milestone was followed by significant volatility, characterized by sharp pullbacks and massive liquidations of over $1 billion. It is important to note that at market peaks, leveraged long positions often face liquidation due to intraday volatility. In contrast, directional short sellers often suffer significant losses during market recoveries. This dynamic highlights the profit potential of this market, as well as the challenges of dealing with volatility as we approach the price discovery phase of the current market cycle.

We also note that, as expected, the selling pressure on ATH came primarily from long-term Bitcoin holders. These investors typically hold assets for the long term (at least 155 days) with an eye on long-term gains. Amid the volatility, these holders take profits and adjust their positions in response to market movements.

The backdrop for this volatility is the Bitcoin halving cycle, which has historically contributed to market performance, especially in the second half of the year. A halving is a pre-planned event that cuts the reward for mining new blocks in half, often leading to increased volatility and stronger markets. Historical patterns suggest that halving year declines are typically limited to around -10%, providing traders with a combination of risk and opportunity.

To help directional traders in this complex environment, especially those employing trend or momentum strategies, the following two exploratory frameworks can be used to assess market momentum and risk levels. These tools are designed to help traders determine strategic entry and exit points, identify market inflection points, and gauge the strength of current trends.



Market Dynamics and Risk Assessment Framework

The Market Momentum and Risk Assessment Framework leverages market data to identify sustained periods of market momentum and potential reversal points. Designed for investors and analysts, this approach helps navigate the complexities of the market by highlighting opportunities in positive momentum phases and identifying risks that could lead to significant drawdowns.

These frameworks serve as complementary analytical tools for examining Bitcoin market dynamics. While targeting different objectives, they are consistent in key analyses, providing a unified view of market trends and risk factors. Although these frameworks are based on historical data and have not been validated out-of-sample, these frameworks systematically analyze four key dimensions of Bitcoin market activity:



Network activity: Evaluate network usage and adoption to identify growth stages and assess demand. High activity levels can indicate strong market momentum, while changes in demand evidenced by transaction fees and competition for block space can indicate changes in risk levels.

Market Profitability: Focuses on investors’ unrealized profits and losses, providing clues about market conditions. A sustained increase in unrealized profits may indicate positive momentum, while heavy profit-taking by short-term holders may increase risk levels.

Spending Behavior: Analyzes the spending patterns of market participants, especially short-term and long-term holders. This helps understand whether profit-taking can be absorbed by current demand and whether investor behavior signals a market top (high risk) or bottom (low risk).

Historical Case: Positive crosses between the 30-day and 150-day lines have successfully marked major uptrends, both during bull markets (such as 2017 and 2020) and during market recovery phases (2019 and most recently 2023 )

Use Tools: Use market parameters to observe intersections between short-term and long-term trends. Pay special attention to negative crossovers, as they may indicate significant changes in market dynamics or wealth distribution.



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