DATA & FIGURES
The current cycle has seen $697 billion in new money generate a 689% gain, while the 2011 cycle saw about $2.8 billion in net inflows drive a rally of roughly 55,000%. The 2015 cycle took about $69 billion for a gain near 10,000%, and the 2018 cycle needed about $365 billion for roughly 2,000%. Bitcoin's market value is currently near $1.2 trillion, per CoinDesk data.
THE SCENARIO
The cryptocurrency market is currently experiencing a decline in capital efficiency, with each new rally requiring far more inflows to produce smaller percentage gains. This trend is likely to continue, with bitcoin's market value near $1.2 trillion and the need for more than $1 trillion in fresh capital to drive another parabolic run. The comparison to gold, which carries a market value near $27 trillion, highlights the potential for bitcoin to absorb more capital and drive its price higher.
DIRECT QUOTE
"Bitcoin needs to be a core macro asset, not just a retail-driven ETF trade" — Ki Young Ju, CryptoQuant founder
BBN INSIGHT
The decline in capital efficiency is a concern for investors, as it suggests that bitcoin's price may not be able to reach the same heights as it has in the past without a substantial increase in investment. However, if bitcoin can absorb more than $1 trillion in fresh capital, it could potentially drive the cryptocurrency's price to new heights. The Positive Side is that this could lead to increased adoption and a more stable market, while the Negative Side is that it may not be possible to attract the necessary investment, leading to a decline in bitcoin's price.
MARKET REACTION
U.S. spot bitcoin exchange-traded funds have seen record outflows over the past month, and bitcoin closed a losing first half, which may indicate that the retail flows needed to drive the cryptocurrency's price higher are running in reverse. However, $16.7 billion of bitcoin was bought by whales in 2 weeks, which could be a sign of increased institutional investment.