Historical Bitcoin ( BTC ) market cycle indicators show that the crypto market is “presently in the middle of the bull run,” backed by a mix of strong fundamental and technical factors, according to a recent report from Grayscale. 

It is not easy to determine the onset of crypto bull runs apart from the fact that BTC price has often peaked 8-11 months after Bitcoin supply halving . Grayscale analysts set out in a recent report to outline the key elements of a bull market.

These factors were broken down into the precursors and the “fifth inning,” showing where the market currently stands.

Precursors to a crypto bull run

According to the report, crypto bull markets have previously begun with a surge in Bitcoin’s dominance.

“This trend emphasizes Bitcoin’s role as a leading indicator for the broader crypto market,” the report added. Typically, a rally in altcoins is preceded by growth in BTC price as investors “venture into higher-risk, cryptocurrencies in search of greater returns” buoyed by their Bitcoin profits.

Grayscale analyst Michael Zhao said,

“This dynamic was observable during the 2021-2022 bull run, a period where Bitcoin’s gains were swiftly followed by a significant uptick in altcoin valuations.”
Bitcoin currently in ‘middle of the bull run’ — Grayscale report image 0 Source: Grayscale

After analyzing Bitcoin’s market value, Grayscale analysts stated that the metric displayed a “familiar pattern” where BTC’s increasing dominance paves the way for a rally in altcoins.

However, three unique catalysts distinguish this cycle from the previous ones: spot Bitcoin ETF inflows, positive stablecoin inflows and decreasing BTC balance on exchanges.

“The first pivotal difference in this bull market compared to previous ones is the rapid change in positive market dynamics, largely influenced by spot Bitcoin ETF inflows ,” noted Grayscale. Since their approval on Jan. 10 , capital inflows into spot Bitcoin ETFs have consistently surpassed BTC “issuance by a magnitude of more than 3 times as of mid-March, which has put upward pressure on the price,” the report added.

Other catalysts of the latest rally in BTC price that saw it breach the previous all-time highs on March 5 were healthy on-chain fundamentals, including the supply of stablecoin on exchanges.

Bitcoin currently in ‘middle of the bull run’ — Grayscale report image 1 Stablecoin supply change: Source. Glassnode

The stablecoin supply change chart showed growth in stablecoin liquidity, indicating the availability of more capital for trading, mainly to buy cryptocurrencies.

“This influx of stablecoin capital, as indicated by rising stablecoin reserves on exchanges, typically fuels the momentum of bull markets.”

Related: Bitcoin lacks support above $60K, chart shows as BTC price halts gains

In addition to an increase in intent to buy, evidenced by increased stablecoin supply, a lack of intent to sell supported by decreasing supply on exchanges is also an important factor backing Bitcoin’s rally.

Additional data from Glassnode reveals that the total number of BTC held in known exchange wallets has declined to about 12% of the total supply, “marking its lowest level in five years.”

Bitcoin currently in ‘middle of the bull run’ — Grayscale report image 2 BTC supply on exchanges. Source: Glassnode

In addition, Grayscale reported that there was a noticeable decrease in the Bitcoin held on exchanges “with a reduction of 7% since the local peak of Bitcoin supply in May 2023.” This signals a supply squeeze partly driven by spot Bitcoin ETFs transferring BTC into custodian cold wallets for long-term storage as investors expect price growth in the future.

Is the bull market here?

After understanding the factors that have driven Bitcoin’s price thus far, it is important to determine where the market presently stands. Grayscale uses a baseball analogy to say, “We are currently navigating the ‘mid-phase’ or the 'fifth inning' of the current bull.”

Using the Net Unrealized Profit/Loss (NUPL) – a metric that calculates the percentage profit/loss by dividing the difference between market value and realized value by the market cap, Grayscale analysts state that the NUPL ratio rose with the increase in BTC’s price. This means as the price grew, investors who bought the asset at lower prices “still hang on to their coins.”

“As of mid-March 2024, with a NUPL at approximately 60% and historical peaks occurring at profit ratios above 70%, it appears we may be approaching a cycle high on this measure.”
Bitcoin currently in ‘middle of the bull run’ — Grayscale report image 3 Bitcoin NUPL ratio. Source: Glassnode

Bull markets are particularly driven by euphoria, fear of missing out (FOMO) and speculative trading from retail investors. One of the ways to determine this is by analyzing retail market sentiment.

Grayscale analysts looked into data from Satiment, which revealed that retail investor interest is still substantially lower than the levels witnessed during the 2021 bull market.

Moreover, data from Google Trends reveals that search interest levels for the word “crypto” are below 40, significantly lower than the peaks seen in 2021 at 99.

This suggests that “the broader public’s curiosity with cryptocurrency might not have fully rebounded,” says the report.

Bitcoin currently in ‘middle of the bull run’ — Grayscale report image 4 Search interest for “crypto.” Source: Google Trends

This raises questions as to whether retail investors are participating in the current cycle.

“To reconcile the rising prices/on-chain metrics with the subdued retail sentiment, it's plausible to consider that the retail investors who fueled the previous cycle haven’t fully re-entered the market.”

However, data from Alternative, a platform that analyzes “emotions and sentiments” around cryptocurrencies, shows that the market sentiments are similar to those seen at the height of the 2021 bull market when BTC hit the previous all-time high of $69,000.

Bitcoin currently in ‘middle of the bull run’ — Grayscale report image 5 Crypto Fear and Greed Index. Source: Alternative.me

This could signal retailers' return to the crypto market, and the associated greed and FOMO are expected to drive prices higher.

After considering these technical and fundamental factors, Grayscale concluded that the “bull run will persist.” The firm, however, advised its investors to cautiously monitor flows into spot Bitcoin ETFs and other macroeconomic factors for signs of market shifts.

Zhao says,

“While progress has been made, we believe there is still room left to run.”

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.