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The recent U.S. presidential election outcome has fueled an impressive rally in the cryptocurrency markets, with Bitcoin price hitting an all-time high, driving the total cryptocurrency market cap to exceed $2.7 trillion, an annual peak. Currently valued at around $1.16 trillion, Bitcoin has now risen to become the ninth-largest financial asset globally by market capitalization. The leading cryptocurrency recorded a 17% increase this week, marking its second-best week of the year, according to data from Glassnode, just shy of a 22% weekly climb back in early March.
To understand if Bitcoin’s price can continue its upward trajectory or if this peak marks a temporary top, it’s essential to examine the sources of demand for Bitcoin and whether this rally is based on spot buying or leverage.
CEX’s Spot Volume Drives Demand Pushing BTC Price Up
An essential indicator in Bitcoin’s current surge is the spot cumulative volume delta (CVD). This metric measures the net difference between buying and selling trade volumes, particularly highlighting whether buyers or sellers were the more aggressive side. It includes transactions quoted in USD or stablecoins, encompassing both fiat and stablecoin pairs.
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A significant portion of this spot CVD comes from Coinbase, a popular crypto exchange among U.S. investors and institutions. This volume surge aligns with a spike in the Coinbase Premium Index, suggesting heightened interest from American buyers. When looking at trends over the past three years, Coinbase CVD spikes often align with local highs and lows. For example, in March, when Bitcoin surpassed $73,000, CVD levels reached one of the highest points. Similar CVD peaks occurred near cycle lows, such as during the Luna and FTX collapses in 2022, suggesting that experienced investors bought near these bottoms while others purchased near the tops.
Genuine Bitcoin Buying or Day Trading?
There’s an ongoing discussion in the industry about whether inflows into U.S.-listed spot exchange-traded funds (ETFs) represent genuine Bitcoin buying or if they’re a part of a strategy known as the basis trade. This trading strategy leverages the difference between spot and futures prices by holding a long ETF position and simultaneously taking a short position in the Chicago Mercantile Exchange (CME) futures market, capturing the price spread between the two.
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When these ETFs were introduced earlier in the year, inflows surged. However, Bitcoin’s price has remained relatively stable, suggesting that the ETFs didn’t impact the price as significantly as some expected. This is likely because these funds operate using a delta-neutral strategy, meaning they offset long and short positions to minimize risk exposure. Approximately 40% of ETF inflows were reportedly linked to basis trading strategies rather than pure spot buying. Despite this, recent records in ETF inflows haven’t been matched by corresponding increases in open interest in the CME futures market, indicating that true spot buying might be at play.
A well-known analyst observed that inflows into spot Bitcoin ETFs have significantly outpaced CME open interest growth in the past week, pointing to renewed direct buying interest in Bitcoin. This trend may contribute to additional buying pressure, potentially leading to more buyers entering the market out of fear of missing out.
Exchange Balances Hit Year-to-Date Low
Data from Glassnode indicates that Bitcoin balances on exchanges have fallen to a year-to-date low of 2.95 million BTC. Since the U.S. election on November 5, exchange balances have seen a reduction of approximately 40,000 BTC. This shift reflects increased demand across multiple exchanges, including Coinbase, Binance, and Bitfinex. Lower exchange balances often indicate that Bitcoin holders are transferring funds off exchanges, suggesting they are preparing to hold or buy more Bitcoin rather than sell.
Bitcoin’s recent surge appears driven by a combination of genuine demand from institutional and individual buyers, particularly in the U.S., as well as a strategic mix of basis trading. The trend of lower exchange balances further emphasizes a strong holding sentiment among Bitcoin owners, pointing to continued interest in accumulating BTC. As long as this demand persists, Bitcoin’s price could maintain its upward momentum, with market participants closely watching for any signs of a new peak or a temporary top in this rally.
Microstrategy and Others Continue to Buy BTC
MicroStrategy, a prominent business intelligence firm headed by the one and only Michael Saylor, has significantly expanded its Bitcoin holdings in recent months. On November 11, 2024, the company announced the acquisition of approximately 27,200 bitcoins for around $2.03 billion, marking its largest purchase since 2020. This acquisition brought MicroStrategy’s total holdings to 279,420 bitcoins, acquired at an average price of $42,692 per bitcoin, totaling approximately $11.9 billion.
Earlier, between August 6 and September 12, 2024, MicroStrategy added 18,300 bitcoins for about $1.11 billion, increasing its total holdings to 244,800 bitcoins at that time. In June 2024, the company acquired an additional 11,931 bitcoins, bringing its holdings to 226,331 bitcoins. MicroStrategy’s plan involves raising substantial capital to fund these acquisitions. The company plans to raise $42 billion over the next three years, equally divided between equity and debt, to purchase more Bitcoin.
Other major companies have also made significant Bitcoin investments:
- Tesla: The electric vehicle manufacturer holds a substantial amount of Bitcoin, though it has not disclosed recent purchases.
- Coinbase: The cryptocurrency exchange has invested in Bitcoin and other digital assets, reflecting its confidence in the crypto market.
- Square (now Block, Inc.): The financial services company has made notable Bitcoin purchases, integrating cryptocurrency into its business model.
- Metaplanet: Metaplanet, a prominent Japanese investment and consulting firm, has been actively increasing its Bitcoin holdings throughout 2024, establishing itself as one of Asia’s largest corporate Bitcoin holders with over 1,000 BTC as of November. This significant accumulation reflects a strategic move similar to other major corporations incorporating Bitcoin into their asset management.
In early October 2024, Metaplanet began its Bitcoin acquisition spree, purchasing 132 BTC across October 1 and 3. This momentum continued with an additional acquisition of 108.8 BTC on October 7, followed by another 109 BTC on October 11.
By mid-October, Metaplanet made yet another substantial purchase of nearly 107 BTC on October 15, bringing its total holdings at that point to 855.5 BTC. This series of strategic acquisitions has positively impacted the firm’s market standing; following the October 15 purchase, Metaplanet’s share price surged by 15.7%.
Metaplanet’s aggressive investment in Bitcoin aligns with the growing trend among corporations leveraging cryptocurrency within their treasury strategies. This approach, echoing the actions of companies like MicroStrategy, underscores an expanding acceptance of Bitcoin as a mainstream asset within corporate finance.
