- Bitcoin on-chain metrics indicate that the digital asset has hit a short-term price top ahead of the U.S. election, according to analysts.
- Despite strong inflows into spot bitcoin ETFs, overall enthusiasm remains subdued, with one ETF seeing significant outflows recently.
- Factors driving the recent bitcoin demand include the upcoming U.S. presidential election, increased risk appetite in broader financial markets, and concerns over rising U.S. budget deficits.
Bitcoin’s price has pulled back from recent highs, and on-chain data suggests the cryptocurrency may have hit a temporary peak just before the US election. Analysts are examining key metrics to gauge whether the market is overheating.
On-Chain Data Points to Market Overheating
According to digital asset custodian Copper’s latest report, 98% of bitcoin wallet addresses are now in profit based on the last transaction price. Historically, when this ratio climbs substantially, selling pressure tends to increase as investors take profits.
Copper analysts say this could signal Bitcoin is nearing a short-term peak. “As we see a substantial percentage of addresses moving into profit, it typically leads to sell pressure,” they explained. “This could suggest that the market is experiencing a temporary top ahead of the US election.”
ETF Inflows Remain Lukewarm
Despite continued inflows into bitcoin spot ETFs, amounting to over $21 billion since mid-October, enthusiasm seems muted lately. After seven straight days of inflows, ETFs saw net outflows on Tuesday according to data from SoSoValue.
Copper analysts noted that while ETF activity helped propel bitcoin past $69,000 recently, “something seems amiss in terms of growth.” They pointed to a lack of large daily growth clusters that occurred earlier this year.
Factors Driving Bitcoin Demand
Analysts from ETC Group cite several key drivers fueling bitcoin’s largest increase in demand since April:
- Increased chances of Donald Trump winning the US election, which has historically benefitted crypto
- Rising risk appetite in broader markets, with stocks and gold at record highs
- Concerns over ballooning US budget deficits and debt steering investors toward bitcoin’s limited supply
ETC Group analysts believe these tailwinds will continue supporting crypto assets in the months ahead.
Conclusion
On-chain data shows signs of overheating, suggesting bitcoin may have peaked temporarily before the election. However, several macro factors could fuel further demand for crypto as 2024 wraps up.
