Forward the original title: Glassnode Insights: A Deep Analysis of Capital Flows and Strong Spot Market Drivers Post-Election, Will the Uptrend Continue?

Preface

This article explores the recent phenomenon of Bitcoin reaching an all-time high and analyzes the factors driving this upward momentum, particularly the strong demand in the spot market for perpetual futures. We examine the impact of the recent U.S. election on institutional capital inflows, highlighting how the popularity of spot holding strategies has led to a surge in U.S. spot ETFs and CME futures open interest. An evaluation of the ATH discovery phase focuses on the percentage of supply in profit and market dynamics that have seen profitability consistently above 95%.

We dive into on-chain cost basis bands to track demand momentum, illustrating how proximity to these bands indicates periods of strong market demand. Finally, we review realized profit levels, noting clear profit-taking activities, but also observing that current levels remain below previous historical highs, suggesting there is still room for further growth.

Post-Election Surge

After the results of the U.S. presidential election were announced, the market widely anticipated that the Trump administration would adopt a more crypto-friendly stance, sending positive signals to the cryptocurrency market and driving Bitcoin to an all-time high. All major BTC:FX pairs reached new historical highs.

The chart shows the retracement of Bitcoin (BTC) against various fiat currencies and gold (XAU) from its ATH. Notably, the BTC:TRY (Turkish Lira) pair was the first to reach an ATH on June 26, 2024, leading the other pairs. By November 6, 2024, nearly all BTC:FX pairs had set new highs, except for BTC:Gold. Despite Bitcoin’s current valuation of $886,000, gold remains approximately 19.9% below its ATH.

Even though Bitcoin’s current dollar valuation stands at $886,000, the BTC:Gold pair is still about -19.9% lower than its ATH.

Historically, U.S. presidential elections have had a significant impact on Bitcoin’s market performance, with both price and real market capitalization (representing the cumulative wealth invested in the Bitcoin network) showing notable changes.

2016 Election (Republican Administration):

• Before the election, real capital surged by 20.3%, and after the election, it increased by 55.5%.
• Before the election, the price rose by 34.7%, and in the months following, the price skyrocketed by 124.6%.

2020 Election (Democratic Administration):

• Before the election, real capital inflows grew by 16.5%, and after the election, they surged by 196.3%.
• Before the election, the price increased by 35.4%, and after the election, it soared by 306.8%.

2024 Election (Republican Administration to Date):

• Before the election, real capital increased by 13.3%, but after the election, it saw a modest rise of 2%.
• Before the election, the price went up by 10.1%, and post-election (so far), it has risen by 27.9%.

Thus, the current cycle reflects a more moderate reaction compared to the pre-election periods of previous years, though still highly optimistic. The market is currently adjusting to potential changes in crypto policies over the coming years.

Bitcoin has continued its recent momentum, setting the largest weekly chart in history with a surge of up to $116,000. This price increase significantly exceeded the historical weekly trend, nearly five times the statistical upper limit (1 standard deviation), indicating an unprecedented bullish momentum.

This extraordinary price movement reflects the market’s optimistic sentiment, with participants viewing the anticipated regulatory environment as a catalyst for sustained capital inflows.

Breakthrough Driven by Spot Trading Volume

The chart highlights the daily cumulative volume delta (CVD) of the Coinbase spot market, showing a significant rise in buying pressure. Recently, the daily spot CVD reached $143 million, approaching the previous high of $152 million set on March 13.

Since July, every Bitcoin rally has been accompanied by a substantial increase in buyer interest on Coinbase, indicating strong spot market demand on one of the largest exchanges in the U.S. This sustained interest from investors suggests growing optimism about digital assets and reinforces the spot-driven nature of the current rally.

Following the strong buying pressure in the Coinbase spot market, the recent rebound has also driven significant capital inflows into U.S. spot ETFs, with assets under management increasing by $6.8 billion in the past 30 days. This growth surpasses the $7.6 billion increase in CME futures open interest, indicating a clear investor preference for spot investment via ETFs.

The correlation between ETF inflows and CME open interest highlights the dominance of spot holding strategies. However, the stronger ETF demand underscores a shift towards direct spot exposure during this market rally.

Typically, as spot market demand continues to grow, the perpetual futures market also shows a similar positive momentum. The recent peak in perpetual futures market premiums—reaching $1.59 million per hour on November 12 (with a 7-day average of $392,000 per hour)—reflects strong speculative demand.

However, this level remains below the mid-March highs, further confirming the hypothesis that the current rally is primarily driven by the spot market. While demand in the perpetual futures market is moderate but significant, it highlights that spot demand, rather than leveraged speculation, has been the primary driver of the price surge so far.

Price Discovery Phase

Bitcoin has entered a new price discovery phase, with all circulating supply turning into profit. This chart shows the percentage of profitable supply and the number of consecutive days each month when this indicator exceeds 95%.

Historically, this phase lasts about 22 days before a correction occurs, during which more than 5% of the supply falls below the initial acquisition price. The current rally has maintained this high-profit level for 12 consecutive days, highlighting strong market sentiment, but also suggesting that a correction may occur in the future based on past patterns.

This chart examines the cumulative realized profits during the new ATH discovery phase, highlighting the scale of profit-taking activity. Historically, realized profits have ranged between $30 billion and $50 billion per month before demand exhaustion, which typically signals a cooling-off period.

Currently, since entering the latest ATH exploration phase, we have realized $20.4 billion in profits. While the profit-taking activity has been significant, it remains below historical peaks, suggesting there is still room for further upside before potential demand exhaustion.

Price Discovery Wave Band

As we enter the new ATH discovery phase, it becomes crucial to identify the most effective price models to navigate this intense market activity. This chart shows the cost basis of new investors along with the statistical upper and lower limits (±1 standard deviation).

During the ATH discovery phase, as new investors enter the market at higher prices, Bitcoin’s price typically approaches and tests the upper limit multiple times, driven by strong demand momentum. Currently, Bitcoin’s price is $879,000, slightly below the upper limit of $949,000. Monitoring the proximity to these bands, especially the upper and middle bands, can highlight periods of strong market demand, reflecting the enthusiasm of new capital entering the market during the rally phase.

At present, the spot price of Bitcoin is $879,000, below the upper limit of $949,000. Monitoring the proximity to these ranges, particularly the upper and middle bands, can highlight when periods of strong demand might slow down and when the price may reach levels that encourage many existing holders to increase selling pressure.

Currently, the average realized profit per day is approximately $1.56 billion, with long-term holders contributing $720 million, accounting for 46% of the total.

Although profit-taking activity has increased, the cumulative realized profits are about half of the levels recorded during previous cyclical ATHs (which exceeded $3 billion per day, with over 50% attributed to long-term holders). This again suggests that if demand continues to flow in, there may still be room for further price increases, and more selling pressure is needed before reaching typical profit realization peak levels.

Conclusion

This report analyzes Bitcoin’s recent all-time highs, which have primarily been driven by strong spot market demand, mainly through U.S. spot ETFs. After the election, institutional investor interest surged, with large inflows into CME futures and ETFs, supporting spot investments and driving Bitcoin into a new ATH discovery phase. Currently, over 95% of the circulating supply is in profit, which typically leads to significant profit-taking activities.

At present, nearly all of the circulating BTC supply is in profit, although a significant increase in profit-taking activity has offset this impact. While both short-term and long-term holders have seen realized profits rise, they remain below previous peak levels, which may suggest that many investors are willing to wait for higher prices.

Disclaimer:

1. This article is reproduced from [MarsBit]. Forward the original title “Glassnode Insights: An in-depth analysis of the strong drivers of capital flows and spot markets after the election. Will they continue to rise in the future?”. The copyright belongs to the original author [Lawrence]. If you have any objections to the reprint, please contact Gate Learn team, the team will handle it as soon as possible according to relevant procedures.
2. Disclaimer: The views and opinions expressed in this article represent only the author’s personal views and do not constitute any investment advice.
3. Other language versions of the article are translated by the Gate Learn team. Unless otherwise stated, the translated article may not be copied, disseminated or plagiarized.