The appeal of Bitcoin trading is on the rise among investors, as indicated by increasing profits across exchanges.
The upward trajectory of Bitcoin’s price is drawing in both traders and speculators, according to recent on-chain analysis.
In its latest newsletter, Glassnode, a blockchain analytics company, detailed a surge in risk-taking behavior among various Bitcoin investor groups, including both institutional investors and those holding their assets for shorter periods.
Bitcoin Investors See Profits
From the beginning of the year, Bitcoin has witnessed substantial capital inflows, with its realized capitalization growing by $30 billion to a total of $460 billion, nearing its highest value ever by just 3%. During this time, the price of Bitcoin surged by 29% to reach $57,000.
The “realized cap” reflects the aggregated value of all Bitcoins, calculated at the prices when they were last traded.
The MVRV ratio, which compares the market cap to the realized cap, helps in assessing the average profit or loss of Bitcoin holders. Currently, at 2.14, this ratio indicates robust profitability, though it doesn’t suggest an imminent cyclical peak.
Glassnode reports a significant enhancement in Bitcoin investor profits, with the average gain now exceeding +120% per coin.
Speculative Activity Increases
Notably, there’s been a spike in trading and speculative activities, evidenced by the high daily volumes of Bitcoin moving to and from exchanges, recently hitting $5.57 billion. The influx is predominantly from short-term holders, highlighting the speculative intent behind these transactions.
“From October 2023, we’ve seen short-term holders contribute to exchange deposits at a rate exceeding 1% of their holdings daily, reaching as high as 2.36% amid speculation driven by ETFs,” Glassnode elaborated. This level of activity is unparalleled since the market downturn in March 2020.
Bitcoin ETFs have also played a critical role in maintaining demand for Bitcoin, with over $6 billion worth of BTC absorbed since their inception on January 11. Glassnode views this as a pivotal development that introduces new avenues for demand and speculation, particularly among institutional participants.
Moreover, the past couple of months have seen a notable rise in the open interest for Bitcoin futures and options, reaching $20.5 billion and $17.8 billion, respectively. The latter even achieved a record high of $20 billion in January, surpassing figures seen in 2021.
Glassnode observes that a significant portion of this activity is directional, with many traders betting against the current uptrend, often resulting in liquidations.