Why Bitcoin (BTC) Is Up 85% This Year: Q2 2023 Review

Bitcoin (BTC)’s performance this year is modeling that of previous 4-year market cycles, signaling the early innings of another potential bull market, according to market analysis firm Reflexivity Research.

The firm published a report this week exploring drivers behind the asset’s strong performance in Q2, examining both market structure and on-chain data.

Who Is Buying Bitcoin?

As the report states, Bitcoin’s present tailwind to two critical events this year: the banking crisis surrounding Silicon Valley Bank (SVB) in March and BlackRock’s filing for a Bitcoin Spot ETF in June.

Each event has “unequally benefitted digital gold relative to other digital assets in the market,” the report stated. Bitcoin now comprises over 50% of crypto’s total market cap, with bulls like Michael Saylor predicting greater highs as regulatory crackdowns drive capital away from altcoins.

Outsized interest in Bitcoin is visible in the futures market, where Bitcoin perpetual futures are “clearly diverging away” from Ether perpetual futures.

Bitcoin Perpetual Futures VS Ether Perpetual Futures. Source: GlassnodeRising interest in Bitcoin seems to be coming out of the United States in particular, where BlackRock’s latest filing could make for the nation’s first official Bitcoin spot ETF. The report notes that most of Bitcoin’s performance has taken place during US trading hours since the asset manager’s submission.

Furthermore, Bitcoin CME futures open interest has risen by $1 billion since the filing, further indicating higher activity among US firms.

A Look on Chain

Regarding network data, the researchers highlighted Ordinals as a “space to keep an eye on over the coming quarters.” The number of total Ordinals inions now nears 15 million, having raised an additional $56 million in fees for miners to date.

The number of Bitcoin addresses holding over 1 BTC crossed 1 million for the first time ever this quarter, and the network settled roughly $2 trillion in transactions during that time.

Reflecting the finding of other firms, including Glassnode and Santiment, Reflexivity said Bitcoin’s supply held by long-term holders is now relatively high, meaning market participants aren’t planning to sell their coins anytime soon.

“Should some of these ETFs get approved, the effects of newfound demand with a near record low available supply could be quite powerful,” the firm wrote.

Nevertheless, a black swan event is still in the cards, “[It] appears to be early innings for this current bull cycle, with the possibility of retesting cycle lows similar to March of 2020 still there,” the report concluded.