Crypto Consolidates as New Interest Cools Down, but Potential Catalysts Emerge : A Data Perspective by IntoTheBlock

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Every week, IntoTheBlock brings you on-chain analysis of top news stories in the crypto space. Leveraging blockchain’s public nature, IntoTheBlock’s machine learning algorithms extract key data that provide a deeper dive into the major developments in the industry. 

Crypto markets have been trading sideways or slightly down for the most part throughout June. As the price of Bitcoin consolidates around the low $30,000s, blockchain activity is cooling off, but institutional interest prevails with several large players entering or doubling down on crypto. 

As of July 1, 2021 using IntoTheBlock’s Capital Markets Insights

In terms of price, Bitcoin closed the month down nearly 5% at $35,000; a relatively stable month by crypto standards. On the other hand, Ethereum took a bigger hit, dropping 17%, but still managing to close above the $2,000 threshold. 

As prices settle down, newcomers are starting to fade. The number of Bitcoin active addresses and new ones being created has fallen steeply, closely following price activity. 

As of July 1, 2021 using IntoTheBlock’s Bitcoin Network Indicators

This pattern has played out time and again, with retail investors often being attracted to enter after months of upwards price action. At a price of $35,000, these addresses that bought near the top consist of approximately 30% of all holders, as indicated by IntoTheBlock’s Bitcoin in/out of the money metric

Although retail activity is slowing down, large players appear to be setting up moves in the crypto market. Amongst these is a16z, which announced its third crypto fund, raising $2.2 billion — the highest so far for any crypto-focused venture capital fund. 

Traditional hedge funds not yet in crypto are also eyeing moves into the space. Most notably, Point72, a $22 billion hedge fund is hiring a Head of Crypto. Billionaire George Soros’ family office also started trading Bitcoin recently. As funds like these get started, a new wave of institutional money is likely to continue pushing crypto forward, much like how it happened in late 2020. 

Large transactions volume, which tracks the aggregate amount transferred in transactions of over $100,000, acts as a proxy to monitor flows from institutional players and whales. This metric has also appeared to cool off, but still remains much higher than it was a year ago. 

As of July 1, 2021 using IntoTheBlock’s Bitcoin Financial Indicators

While institutional activity on a daily basis seems to have settled down, it is worth noting that large players like these often invest with a multi-year time horizon. Therefore, it is normal for large transaction volume to drop-short term, and this does not mean institutions have left or sold their crypto. 

As these hedge funds look into crypto, there is a race towards offering them the most convenient way to invest in Bitcoin: an ETF. Most recently Cathie Wood’s Ark Invest joined the list of dozens (hundreds?) of firms to file for a Bitcoin ETF. 

With applications for a Bitcoin ETF tracing as far back as 2013, it is fair to say that there is plenty of anticipation for a product like this to come to market. Making investing in Bitcoin as convenient as in any other asset is likely to be a massive catalyst for hedge funds and other traditional investors.

Overall, there is this contrast between retail interest fading away and institutional players looking to get in. As this demand adds up and prices consolidate, it is likely that crypto markets are taking a break prior to continuing the bull market.

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