The recent surge in the prices of Bitcoin and Ethereum, which has led to a broader market recovery in the cryptocurrency space, can be attributed to significant investments made by major holders and institutional investors. A recent report from CryptoQuant has provided valuable insights into this surge, identifying it as a key driving force behind the steady upward momentum observed in the crypto market.
One of the pivotal factors highlighted in the report is the rapid growth in the total balances held by permanent holders and large investors. Over the past 30 days, there has been a notable accumulation of approximately 70,000 Bitcoin by permanent holders, marking the most significant increase in holdings since late April. Additionally, daily inflows from new large Bitcoin investors have surged to an impressive $1 billion, reminiscent of the substantial accumulation period witnessed in 2020 prior to Bitcoin’s remarkable rally from $10,000 to $70,000.
Moreover, the report sheds light on the substantial increase in Bitcoin purchases from spot exchange-traded funds (ETFs) in the United States. Total holdings of Bitcoin in these spot ETFs have witnessed a notable uptick, rising from 819,000 on May 1st to 859,000 at present. According to CryptoQuant analysts, these purchases have emerged as a significant source of demand for Bitcoin in the current year. Furthermore, there has been a notable reduction in selling pressure from traders, as evidenced by the resetting of the unrealized profit ratio to 0%, indicating a depletion in heavy selling activities among traders.
The report also underscores the surge in demand for Ethereum (ETH) following the approval of spot ETH ETFs in the United States. Since the announcement of ETF approval on May 20, the daily purchase of Ethereum from permanent holders has witnessed a substantial increase, averaging around 40,000 ETH. This represents a significant uptick from the 5,000 ETH purchased on average before the ETF announcement. Additionally, the total holdings of large Ethereum investors have seen a significant rise, reaching 16 million ETH. This marks an increase from 15.4 million ETH before the ETF approval and 14.9 million ETH at the beginning of 2024.
However, despite the positive trends observed for both Bitcoin and Ethereum, stablecoin liquidity has yet to regain its growth trajectory, which is crucial for sustaining a broader price rally in the crypto market. CryptoQuant has issued a warning regarding the deceleration in the market capitalization growth of Tether’s USDT, which serves as a proxy for fresh liquidity in crypto markets. Currently, the growth of USDT market capitalization is at its slowest pace since February 11.
In summary, the influx of investments from major holders and institutional investors, combined with reduced selling pressure from traders, has played a significant role in driving the prices of Bitcoin and Ethereum higher. However, sustaining this momentum may depend on the recovery of stablecoin liquidity, which remains a critical factor for supporting a broader price rally in the cryptocurrency market.