Speculators And Traders Are Rushing Back Into Bitcoin, On-Chain Data Shows

Bitcoin’s fast-rising price is attracting traders and speculators back into the market, on-chain data suggests.

In a Tuesday newsletter, blockchain intelligence firm Glassnode highlighted how risk appetite is increasing across various cohorts of the Bitcoin market, including institutional buyers and short-term holders alike.

Bitcoin Holders Back In Profit

Since the start of the year, Bitcoin has enjoyed massive capital flows, with the asset’s realized cap rising by $30 billion to $460 billion – just 3% away from its all-time high. The asset’s market price has risen 29% to $57,000 within the same period.

“Realized cap” is a measure of the value of all Bitcoin put together, priced based on the time that those coins were last sold.

When measured against Bitcoin’s market cap using the MVRV ratio, one can estimate the profitability of the average Bitcoin investor. The ratio currently sits at 2.14 – a relatively high value, but not high enough to suggest Bitcoin is approaching its cyclical top.

“As a result of this strong performance, the profitability of Bitcoin investors has improved markedly, with the average investor now holding an unrealized profit of +120% per coin,” wrote Glassnode.

Return of Speculators

The firm identified rising interest in trading and speculating based on rising on-chain daily volume flowing in and out of Bitcoin exchanges, which reached a near-record $5.57 billion in recent weeks. Exchange deposits primarily came from short-term holders, underscoring the speculative nature of recent interest.

“Since Oct 2023, the STH cohort have been depositing upwards of 1% of their supply per day, peaking at a value of 2.36% during the recent ETF-led speculation,” Glassnode continued. “This is the largest relative deposit since the March 2020 sell-off.”

Bitcoin ETFs are also a significant and visible source of ongoing demand for BTC. Such funds have absorbed over $6 billion in BTC since launching on January 11. Glassnode said they’ve opened “a new degree of freedom for demand and speculation” – especially for institutional buyers.

Finally, open interest in Bitcoin futures and options have seen significant upticks in the past two months, rising to $20.5 billion and $17.8 billion respectively. The latter already tapped an all-time high of $20 billion in January, far surpassing 2021 levels.

“Much of this appears to be directional, as many traders continue to bet against the prevailing uptrend (being liquidated as a result),” Glassnode noted.