Every week, IntoTheBlock brings you on-chain analysis of top news stories in the crypto space. Leveraging blockchain’s public nature, IntoTheBlock’s machine learning algorithms extract key data that provide a deeper dive into the major developments in the industry.
This week, we provide an overview of the bull market that has kicked off 2021, looking both at the outstanding performance of crypto and potential signs of excessive risk-taking.
3 Key Insights of the Crypto Bull Market
Crypto markets have gone full throttle in 2021. As many cryptoassets set new all-time highs, crypto has been experiencing returns not seen since 2017. Despite the volatility seen in March 2020, cryptoassets have bounced back, dwarfing the returns of traditional stock indices.
DeFi Tokens Lead the Way
Primarily Ethereum and smaller cap assets have been leading the 2021 rally. As per CoinMarketCap, 48 out of the top 100 cryptoassets have at least doubled in 2021 at the time of writing, while Bitcoin appreciated a still-impressive 37%. Out of the highest performing assets, decentralized finance (DeFi) tokens have stood out.
Starting the year at approximately $10 billion in aggregate, DeFi tokens have managed to triple in value within five weeks. Along with this, the most-closely followed metric for DeFi’s fundamentals has also increased remarkably.
Total value locked (TVL), which measures the aggregate dollar amount deposited into DeFi applications, has grown by $11 billion in 2021. While the growth in value locked is partly due to the appreciation of the assets deposited, it should be noted that the amount of Ether deposited into DeFi protocols has also increased during this time.
Crypto Interest Sets New Highs
Following a year marked by institutional adoption in Bitcoin, retail interest in crypto has surged back. After more than three years, the number of Google searches for “crypto” has finally surpassed the levels seen in the first week of January 2018.
Short-Term Trading Also at Yearly Highs
Interest has unsurprisingly also picked up on the trading side. The number of addresses holding Bitcoin for under one month — classified by IntoTheBlock as traders — is also at its highest level.
Approximately 14% of the Bitcoin in circulation is being held by traders’ addresses, meaning that a sizable amount of the total supply changed hands within the last 30 days.
On a similar note, on-chain data shows millions of addresses have been chasing Ether’s all-time highs. The left axis on the chart below displays how most addresses who previously bought near the 2018 high had diminished, prior to having a wave of new addresses buying at the most recent all-time highs.
Interestingly, we see the number of addresses who had bought near ETH’s all-time lows (right axis) decrease at an accelerating rate in the past few months. This exemplifies the changing dynamic from long-term players taking profits while new entrants chase the highs.
While Ethereum, DeFi tokens and crypto broadly have appreciated remarkably in the past few months, it is worth considering that there is an excessive amount of short-term trading at the moment. Even though the potential long-term for these assets is remarkable, investors should take caution and never invest more than they can afford.