Continued Positive Capital Netflows Suggest Potential for bitcoin Rally

The cryptocurrency market is currently experiencing significant positive capital netflows, indicating a possible continuation of the bitcoin rally. Analyst Ali highlighted this trend in a recent post on X, referencing the Glassnode indicator, which measures netflows into the sector by examining two factors.

Tracking Inflows in Major Cryptocurrency Asset Classes

The Glassnode indicator monitors the 30-day net position change in the “realized cap” of bitcoin and ethereum. The realized cap is a valuation model that calculates the total worth of an asset by assuming that the last transaction price represents its true value.

Additionally, the indicator tracks the supply change of major USD stablecoins, which are tied to the value of the dollar. Since these stablecoins remain relatively stable, their supply and realized cap are similar.

These asset classes were chosen as indicators of cryptocurrency market capital netflows because they account for a majority of such transactions. Historically, altcoins have received capital after a shift from these major assets.

Capital Netflows for bitcoin, ethereum, and Stablecoins in 2023

The chart below illustrates the capital netflows in the cryptocurrency sector throughout the year 2023:

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As shown in the graph, during the recent bitcoin slump, the indicator’s value was negative, indicating a rapid outflow of capital from the sector. However, the metric turned positive last month, coinciding with bitcoin‘s impressive surge towards the $35,000 level. The rest of the cryptocurrency sector followed suit, with altcoins experiencing their own surges.

The chart also displays the net position change for the realized cap of bitcoin and ethereum, as well as the supply change for stablecoins. It reveals that the capital inflows primarily came through bitcoin and ethereum, while stablecoins saw more modest growth.

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At present, the sector’s inflows continue to show no signs of slowing down, with the indicator reaching a new 2023 high of $10.97 billion. This sustained investor interest bodes well for the bitcoin rally, indicating potential for further growth.

bitcoin Price Consolidation and Potential Restart of the Rally

bitcoin‘s price has recently entered a consolidation phase around the $35,000 level. However, considering the market inflows, there is a possibility of the rally resuming in the near future.

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Looks like the coin has been moving sideways in the last couple of weeks | Source: BTCUSD on TradingView

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By Team