Bitcoin's Gradual Rise: Analyst Sees Shift Towards Institutions
Crypto analyst Benson Sun thinks that Bitcoin's current bull cycle will unfold differently than past cycles. Unlike the rapid, culminating rallies in 2013 and 2017, this cycle may be more gradual. According to Sun, the main reason for this change is the shift from individual investors to larger players such as publicly traded companies, spot Bitcoin ETFs, and institutional treasuries.
Sun notes that traditional indicators such as funding rates and MVRV Z-Score may not reach extreme levels seen in previous cycles. This is due to institutional investors predominantly buying from the spot market and some funds using delta-neutral strategies for arbitrage purposes.
The key factor determining the peak of the new cycle, Sun says, may be institutional capital's difficulty in following the rise in Bitcoin. He uses an indicator called the Institutional Liquidity Index (ILI) to track this situation. The ILI takes into account overall US dollar liquidity, Strategy’s mNAV indicator, and net capital flows to spot Bitcoin ETFs.
Sun explains that a 'yellow divergence' signal occurs when Bitcoin reaches a new 30-day high while the ILI indicator does not rise in the same direction. Conversely, a 'red divergence' occurs when Bitcoin surpasses its all-time high but the ILI indicator shows negative divergence and falls below 50.
Sun uses the frequency of yellow divergences as a reference point to evaluate which phase of the market cycle the market is in. He gradually reduces his altcoin positions and leverage with each signal, eventually opting to hold only spot BTC.