On-chain data suggests that bitcoin‘s rally could continue as the sector still sees significant positive net capital flows.
Major asset classes in the cryptocurrency sector continue to see inflows
As analyst Ali pointed out in a mail At X, a lot of capital is flowing into the cryptocurrency market right now. The Glassnode indicator that the analyst has cited tracks the net flows entering the sector by measuring two things.
First, find out the 30-day net position change in the “realized limit” of bitcoin and ethereum. The cap made here refers to a capitalization model that calculates the total valuation of an asset assuming that the price at which each token on the chain last moved is its true value.
Since the movement of a token could likely represent a change of hands, the price at which the transaction took place was its purchase price. Thus, the limit made provides us with information about the amount of capital that all holders have used to purchase the cryptocurrency.
The second thing the market net flow indicator tracks is the change in supply of the major USD stablecoins. Since these currencies are pegged to the dollar, their supply is the same as their market capitalization, and since they remain relatively stable, their realized limit is also roughly the same.
The reason these three asset classes have been chosen to track the cryptocurrency market’s net capital flows is that the vast majority of such transitions occur through them. Historically, altcoins have only received their capital after a forward rotation of these major assets.
Now, here is a chart showing how the sector looked in terms of net capital flows during the year 2023:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/11/Will-Bitcoin-Rally-Continue-This-signal-remains-green.jpeg" alt="bitcoin, ethereum and Stablecoin Network Flows” width=”1800″ height=”1013″/>
The value of the metric seems to have been quite positive in recent days | Source: @ali_charts on X
As shown in the chart, the indicator’s value had been negative during the decline that bitcoin had observed a while ago, implying that capital was rapidly leaving the sector.
However, last month, the metric finally turned positive and what followed was btc‘s impressive run towards the $35,000 level. The rest of the sector also moved ahead of the original cryptocurrency, as altcoins saw their own increases.
On the chart, the net position change for bitcoin and ethereum realized cap, and that of the stablecoin supply are also shown separately. From it, it is visible that capital inflows this time mainly came through btc and eth as the stablecoins have seen relatively moderate growth.
So far, inflows into the sector have not entered a slowdown phase, as the indicator has only become more positive and has just set a new high for 2023 of $10.97 billion.
Naturally, this is a positive sign for bitcoin‘s rally, as continued investor interest in the sector means the rally could remain sufficiently driven.
bitcoin price
bitcoin has slowed down recently as its price continues to consolidate around the $35,000 level. However, if capital inflows into the market are anything to go by, the rally is likely to resume in the near future.
<img decoding="async" class="alignnone size-medium aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/11/Will-Bitcoin-Rally-Continue-This-signal-remains-green" alt="bitcoin price chart” width=”1534″ height=”869″/>
Looks like the coin has been moving sideways in the last couple of weeks | Source: BTCUSD on TradingView
Featured image by André François McKenzie on Unsplash.com, TradingView.com charts, Glassnode.com
