Bitcoin (BTC) has experienced a remarkable surge in price, increasing by over 200% in the past year and reaching a record high above $73,000 on March 13. This surge has led to a shift in investor sentiment towards a state of euphoria, as noted by market intelligence firm Glassnode.
In their recent report, Glassnode highlights that Bitcoin’s surpassing of the previous all-time high of $69,000 set in November 2021 marks the fourth new cycle all-time high in the history of the cryptocurrency. Analysts, such as Checkmate, attribute this significant rally to Bitcoin entering the “Euphoria Zone” of its bull run, a phase typically accompanied by new all-time highs.
This sentiment is further supported by data from Alternative, which indicates that market sentiments and emotions have reached the “extreme greed zone” with a score of 81. In this zone, investors tend to become greedy as the market rises, leading to the fear of missing out (FOMO) as speculators enter the market.
Glassnode also notes that this shift in sentiment historically triggers a change in investor behavior, particularly in the balance between long-term holders and speculators. It is observed that wealth is transferred from older investors to younger ones during Bitcoin bull markets.
The distribution pressure from long-term holders has increased as Bitcoin reaches new all-time highs, indicating a net expenditure by investors who held their coins for at least three months. Additionally, Glassnode’s data shows a 54% increase in new Bitcoin wallets over the span of one month, reflecting the 58% gains in BTC’s price during the same period.
The increase in short-term supply holders by 810,000 BTC since November 2023 is believed to come from two sources: 660,000 BTC transferred from long-term holders and 150,000 BTC withdrawn from monitored exchange balances. On the other hand, the supply of long-term holders has declined by 660,000 BTC during the same period.
The rally in Bitcoin’s price has also triggered profit-taking by long-term holders, which is balanced by an inflow of demand from short-term holders. This is evidenced by the spike in the realized profit metric, indicating increased capital inflows, demand strength, and profitability of the network.
According to Glassnode, this spike in the realized profit metric is a sign of the beginning of the euphoria phase, similar to what was observed during the 2017 and 2021 bull runs.
It is important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research and make informed decisions when it comes to investments and trading.