Crypto Market Monitor
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The total cryptocurrency market capitalisation went up strongly last week. The crypto market cap increased by 14.31% in the previous seven days to USD 1.88 trillion. Stablecoin market cap increased by 1.1%, reaching USD 137.5bn, and is rising. Confidence in crypto is growing as stablecoins are the entry doors to DeFi activities. Finally, Bitcoin price rose by a massive 17.2% in the week under review and continues to dominate the entire space with a market share of 54%, up from 52% last week. Ethereum’s price also increased by 14%, showing a consistent market share of about 17.7%.
Bitcoin continues its run and crosses the USD 50K mark.
Bitcoin investors continue to enjoy a positive and robust 2024, with the BTC market trading to new multi-year highs of USD 52.4k. When writing, BTC trades at USD 51.8K and has a YTD return of 23.57%. This rally puts the supply of a super-majority of investors into profit, edging the market closer to yet another transitional phase, where long-term holders (LTHs) start to take chips off the table slowly. According to data from Glassnode, the LTH supply balance has decreased by approximately 299.5k BTC since the metric peaked in November last year.
Figure 1
Figure 1 shows how both cohorts' net unrealised profit/loss (NUPL) has been in an uptrend. Currently, LTH-NUPLs are higher than that for short-term holders (STHs). For STHs, the 'sell-the-news' correction after the ETFs launched has resulted in a healthy reset of several metrics. Historically, this correlates with formations of local lows when the market is within a macro-scale uptrend.
In the weeks following the recent spot BTC ETF approvals, Bitcoin and Ethereum have witnessed a spike in monthly volatility, nearing statistically high levels. For momentum and directional traders, this increase in volatility serves as a critical indicator in the early stages of a bull market, signaling potential entry points for strategic trades ahead of the heightened risk of a correction. This volatility has, however, subsided in the past two weeks. With the Bitcoin halving in April, we expect the market to have some speculative activity throughout March.
Figure 2
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To sift through this noise amidst the volatility, we can look at Bitcoin's MVRV Z-score. MVRV measures the ratio between the spot price and the overall cost basis of the market (realized price). This indicator examines the dollar value of the total net profit or loss as a percentage of the market cap. The metric's Z-Score sees whether Bitcoin is overvalued or undervalued relative to its "fair value". (it's realized value) Instead of using a traditional z-score method, the MVRV Z-score compares the market value to BTC's realized value.
Figure 3
Historically, bitcoin has seen significant drawdowns once this score has touched 6 and above. With the MVRV Z-score currently hovering around 2, we can expect higher highs before we see major shakeouts. Investors and traders can use the MVRV Z-score as a reliable risk metric to derisk at appropriate levels when the market seems to be overheated.
Other notable news of the week:
Impressive analysis—keeping an eye on the crypto market's movements is crucial for understanding the broader financial landscape.