Bybit Institutional x Treehouse: Crypto Landscape in Q1 2024 Analysis & Narratives

Advanced
Crypto Insights
Blog
Feb 18, 2024
6 min read

AI Summary

Show More

Detailed Summary

Key Highlights:

Our latest research, co-authored with Treehouse, delivers a deep dive into Q1 performance for Bitcoin (BTC) and Ethereum (ETH), along with the narratives shaping the rest of 2024.

Throughout the report, we'll unveil the dominant players driving both centralized and decentralized exchanges (CEXs & DEXs). In addition, you'll discover how crypto adoption and innovation are taking center stage in Central and Southeast Asia. 

With the latest Bitcoin halving looming in April 2024, this report examines the historical impact of these events on Bitcoin's price and how they reinforce the coin's scarcity and reliability. You'll also discover Bitcoin's potential to hedge equity-focused portfolios. ️As we dive into on-chain metrics for BTC and ETH, including the rise of smaller wallets and the decline of larger ones, you'll be able to critically identify the key events that could fuel the next crypto bull cycle. 

Additionally, while we examine derivatives domination we’ll explore the prevalence of perpetual contracts in derivatives markets. At the same time, a shocking analysis reveals the prevalence of changes in investment behavior in crypto — with a decrease in long-term BTC holders and a rise in shorter-term strategies.

Finally, the report touches on the resurgence of challenger blockchains and the VC landscape's growing interest in infrastructure, gaming and AI projects.

Download the full report

Speak to our representative: Get Started

Learn more about Bybit Institutional: About Bybit Institutional

Find out the Bybit Institutional Fee Structure


Introduction

The end of 2023 was marked by a series of notable events that reverberated throughout the cryptocurrency market, shaping its trajectory and influencing investor sentiment. Recent geopolitical tensions and financial market instability have injected turbulence into the macroeconomic landscape, including conflicts such as the Hamas/Israel war in October and the ongoing Russian war with Ukraine, and the weakening of Chinese financial markets.

Meanwhile, notable transformations in the regulatory landscape have exerted profound effects upon market dynamics. Ripple's triumph in the SEC lawsuit on Jul 13, 2023 marked a significant milestone, reflecting a shift in the U.S. government's approach to cryptocurrencies. Additionally, Binance founder Changpeng Zhao pled guilty to money-laundering violations, which caused repercussions throughout the crypto industry and highlighted the heightened scrutiny and regulatory challenges faced by major players. Finally, the surge of interest following the recent Bitcoin Spot ETF approvals has impacted the regulatory environment, influencing investor perceptions and shaping overall market sentiment.

Looking Back, Looking Forward

Toward the end of 2023, anticipation surrounding Bitcoin Spot ETFs reached a fever pitch. However, contrary to expectations, the approvals didn’t result in the immediate astronomical returns as many had hoped. Instead, concerns emerged over Grayscale's selling pressure as institutional investors fled to cheaper alternatives to gain exposure in Bitcoin, weighing heavily on market sentiment.

Nevertheless, as the bearish sentiment toward the large outflow settles, Bitcoin Spot ETF net inflows hit a record $2.5B in the week of March 11, 2024. During the same week, Bitcoin also achieved an unprecedented milestone, breaking its previous all-time high of $69,000 and reaching a peak of almost $74,000. The narratives from Q4 2023 have persisted into the early part of 2024, providing valuable insights into the potential long-term trajectory of the crypto industry. As we progress further, it’s evident that these themes are continuing to shape the landscape of digital assets, offering opportunities and challenges for institutional stakeholders.

In the latter part of this report, we’ll highlight several themes anticipated for 2024 in the hope of encouraging institutional stakeholders to explore the evolving landscape of digital assets with more informed perspectives.

Analysis of the Current Blue Chip Assets Landscape

This chapter commences by examining the performance of Bitcoin (BTC) both before and after the approval of Bitcoin Spot exchange-traded funds (ETFs). Our analysis explores how this regulatory shift, along with the corresponding rise in aggregate open interest on major exchanges like Bybit, may have contributed to a significant increase in overall market activity. We then delve deeper by incorporating on-chain metrics, such as the distribution of addresses by BTC holdings, and miner behavior during price fluctuations. By considering these factors, we aim to draw comprehensive conclusions regarding the potential impact of Spot ETFs on the Bitcoin market.

This report will subsequently conduct a more in-depth analysis of market cycles, particularly in light of several significant events that have contributed to the crypto industry's overall growth.

Beyond the recent approvals of Spot ETFs, we’ve observed the emergence of a robust inscription ecosystem, the successful launch of the Dencun Upgrade on the Ethereum Mainnet and the anticipation surrounding the upcoming Bitcoin halving event. As market momentum strengthens, the derivatives market is exhibiting increasingly bullish sentiment that’s evidenced by the surge in cryptocurrency open interest.

Investment Behavior

When analyzing users' investment behavior, the report primarily focuses on BTC holding durations using on-chain metrics, revealing a drop in longer-term holding due to potential profit-taking activities as Bitcoin reached a new all-time high. Although ETH exhibits a strong correlation with BTC, SOL has emerged as the top performer among challenger tokens, continuing the trend observed in 2021 as the biggest challenger chain by TVL and transaction volume. This indicates that we may be at the early stages of a new bull market cycle, as investors are willing to bet on challenger chains to potentially dethrone Ethereum’s dominant status.

The Future Outlook

We wrap up the report by analyzing the long-term effect of Spot ETFs, as they pave the way for a more diverse and expansive investment portfolio, signaling a pivotal bridge toward mainstream financial acceptance. Meanwhile, the fourth Bitcoin halving looms as a major milestone that could require close monitoring. As it’s still early for 2024, some of the key themes for investors to keep a close eye on include the upcoming Ethereum Spot ETF approvals, the remarkable growth of the Solana ecosystem, the rise of artificial intelligence and tokenization of real-world assets.

Conclusion

The crypto market appears to be emerging from its long winter, buoyed by increasing clarity in regulatory landscapes and a notable uptick in institutional adoption. Combined with the approval of Bitcoin Spot ETFs and growing confidence among investors, this suggests a promising outlook for the future of digital assets. 

Regardless of your investment portfolio or status, navigating the landscape of digital assets trading requires careful evaluation. We shed light on ways to carefully select exchanges and platforms that align with your investment objectives, and operation requirements that yield the best results. 

#BybitInstititional #BybitResearch

Bybit App
Earn the smart way