Over the past month, the crypto market has looked like a rising tide for all coins — but data suggest growth across the asset class hasn’t been equal.
Last week, Bitcoin (BTC-USD) breached $50,000 for the second time in two weeks, extending a rally that put a grim sell-off that started in May further in the rear-view mirror. While notable for its volatility, gains in the the largest cryptocurrency may have gotten lost in the swell of rising prices across the entire asset class.
With a majority of decentralized finance and non-fungible token (NFT) trading happening on the Ethereum (ETH-USD) blockchain, the second largest cryptocurrency by market capitalization rose by a third from $2,700 to $3,900, a growth rate 17 percent higher than BTC.
And other blockchain-based currencies such as the third highest valued cryptocurrency, Cardano (ADA-USD) has more than doubled while a newer one, Solana (SOL-USD), has more than tripled in value over the past month. ADA and SOL have continued to notch almost daily all time highs for the past two weeks.
Bitcoin IRA, an investment platform that helps retail investors gain crypto exposure in their retirement accounts, saw “record-breaking inflows” of new accounts over the previous month.
“We broke our record in the first quarter right before Bitcoin ran from $45,000 to $65,000,” the company’s Chief Operating Officer, Chris Kline told Yahoo Finance. “We’re seeing the same pattern happen again. So this past month [August] felt a lot like April, but about twice as big.”
The search for growth
Currently, Bitcoin IRA has close to 120,000 client accounts, with approximately $2 billion in assets on the platform. Although platform’s heft doesn’t move the market, the swell of retail investors opening new accounts — especially for tax-advantaged IRA accounts — is an indicator of how curious investors are as they seek more traditional ways to participate in this market.
By rough approximation across all accounts, Kline said his clients hold 43% of their portfolio in bitcoin, 27% in ethereum, and the remaining 30 percent in a mix of other cryptocurrencies. The company offers 10 different cryptocurrencies in total, and is planning to more than double their crypto offerings in the fall.
Back in early May when Ethereum started rising to its all-time high above $4,000, the company saw a large influx of swaps or pairing from BTC to ETH. It signaled many of his clients were shifting their portfolios from BTC to ETH.
However, in recent weeks? “Not so much this time,” Kline told Yahoo Finance.
To be sure, there could be a lag. “Retail buyers are looking for percentage growth. While bitcoin reigns supreme, it has relatively stable growth while there is exponential growth happening on ethereum. That’s what really gets their attention,” Kline explained.
Bitcoin’s August peak at $50K served as a “key technical and psychological level,” according to Will Clemente, an analyst at crypto mining and hardware broker Blockware Solutions.
Clemente told Yahoo Finance that for the last seven days, bitcoin’s price has remained in what he called a “volatility squeeze.” The idea being that buyers and sellers have balanced each other out, thereby reducing the asset’s typically high volatility.
But the analyst suggested that could be about to change. A volatility squeeze for bitcoin usually takes a week to two weeks to resolve.
“That’s not telling you the direction, it’s just telling you that there’s going to be a big move soon,” said Clemente.
Analyzing price action alone remains a dominant, more contested method for predicting buyers and sellers around a cryptocurrency. But Clemente’s specialization, on-chain analysis, has quickly become a crucial tool kit of metrics for investors hoping to gleam some clarity into the nascent asset-class.
Similar to technical analysis, the on-chain technique tries to forecast future moves based on supply and demand. However, it relies on a far larger quantity of data only available for assets operating on publicly available blockchains.
While Clemente cannot predict the price shift of Bitcoin, he pointed to a handful of supply shock ratios, such as the movement of coin supply from speculators to long term holders and the exchange supply ratio, which shows the number of Bitcoins available to buy on exchanges relative to the overall circulating supply.
Each of these metrics continue to rise higher after Bitcoin crested above $50,000, according to Clemente. Historically, supply shocks begin before the Bitcoin price moves upward.
David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.