Bitcoin (BTC) has absorbed approximately $450 billion in additional capital since November 2022, bringing the total Realized Cap to $850 billion, according to a recent report by Glassnode.
The report noted that Bitcoin has maintained a price above $100,000 for several weeks, seven years after reaching $10,000 during the 2017 bull run.
According to Glassnode, the growth in Bitcoin’s realized cap is driven by its increasing role on the global stage, which has attracted institutions and sovereign entities.
The report highlighted nation-states engaging with Bitcoin as a key factor, including Bhutan engaging in large-scale mining operations, El Salvador establishing Bitcoin as a legal tender, and the US considering its potential as a strategic reserve asset.
Despite ongoing debate over its intrinsic value and utility, Bitcoin has become one of the largest global assets. With a market capitalization of $2 trillion, it has surpassed silver’s $1.8 trillion, Saudi Aramco’s $1.8 trillion, and Meta’s $1.7 trillion market caps.
As Bitcoin’s valuation increases, larger capital inflows are required to sustain its market growth. The Realized Cap metric, which tracks the cumulative net capital inflow, highlights Bitcoin’s growth.
Bitcoin also functions as a decentralized payment network. Over the past year, the Bitcoin network has processed an average of $8.7 billion daily in adjusted economic transactions, totaling $3.2 trillion in transaction volume.
These metrics challenge the assertion that Bitcoin lacks value and utility.
Demand is still lackluster
Since the collapse of FTX in November 2022, Bitcoin’s dominance within the digital asset ecosystem has increased, rising from 38% to 59%.
Bitcoin’s market capitalization has increased 5.3x from $363 billion to $1.93 trillion, whereas the altcoin market has expanded 4.7x from $190 billion to $892 billion. Despite the high correlation between Bitcoin and altcoins, BTC has attracted a disproportionately larger share of new capital.
Additionally, institutional investors have preferred Bitcoin, which is facilitated by US spot Bitcoin exchange-traded funds (ETFs). The report attributed this interest to Bitcoin’s inherent scarcity and its role as a hedge against fiat currency debasement.
However, the increasing interest from nations and institutions has not been enough to generate new demand for Bitcoin, which remains lower than in previous cycles.
Evolving investor behavior
According to Glassnode, new demand now appears in bursts rather than sustained inflows like previous cycles. Small retail participation has declined compared to the 2021 peak, while larger entities have increased their holdings.
Despite favorable market conditions, Google’s search interest for Bitcoin has not reached 2021 levels. The investor base is evolving, with retail participants showing more strategic accumulation behavior.
The introduction of US spot Bitcoin ETFs has enabled institutional investors to gain exposure, with over $40 billion in net inflows and over $120 billion in combined assets under management within a year of launch.
The Bitcoin investor base has demonstrated resilience during market pullbacks. The current cycle has seen lower realized losses than previous cycles, with the only significant event being the yen-carry unwind on Aug. 5, 2024. The report also highlighted that Bitcoin’s drawdowns have been more controlled, with lower realized volatility, unlike past cycles.
The price action in this cycle has been characterized by a series of rallies followed by periods of consolidation, contributing to a more stable market structure attributed to more mature players trading Bitcoin and other crypto.
