Bitcoin on-chain data reveals that speculators and long-term holders have become increasingly confident of higher prices as their selling activity has slowed down significantly.

For the very first time in a Bitcoin (BTC) bull market, not only long-term investors but also short-term speculators who usually add to the daily sell pressure toward the end of a market cycle have become increasingly confident of higher prices as they hold on to their Bitcoin.

This only adds to the already existing supply shock. If demand remains strong, this is a recipe for another leg up for the BTC price.

Bitcoin selling activity is declining again

Every Bitcoin bull market usually coincided with an increasing number of short-term speculators coming into the market hoping to turn a quick profit, while long-term speculators start to add sell pressure toward the second half of the market cycle to realize their profits.

One of the best on-chain indicators to see this trend unfold in each cycle is called HODL waves. Hereby, the length at which each BTC address holds Bitcoin before they are sold into the market is clustered into term buckets that are then visualized in different color bands.

For example, someone who held on to their Bitcoin for five months would fall into the 3m-6m bucket, the light orange color band. If that person decides to sell, it falls out of that bucket and would show up in the 24h-term bucket, the dark red color band.

This means, the redder the colors are in the HODL waves chart on a respective date, the more short-term turnover of Bitcoins happens. This activity is almost at its lowest during a bear market, and at its highest during a bull market, while the short-term activity tends to peak around a bull market top.

Reflecting realized value in HODL waves is critical

Since the Bitcoin price fluctuates significantly during the market cycles, and HODL waves only account for the absolute number of Bitcoins moved, this chart does not account for the total value realized on a respective day by a Bitcoin seller.

As it becomes increasingly lucrative for hodlers to take profit the higher the price rises, the HODL waves can be weighted by the realized price, which is the price at which each Bitcoin on average was last bought /sold.

This adjustment allows for visualizing the value-driven profit-taking on a daily basis through the value-adjusted colored, term buckets.

Bitcoin cycle tops tend to form around the short-term activity peak

Once HODL waves are weighted by the realized price, the Realized Cap HODL Waves are derived, a concept that was first introduced by on-chain analyst Typerbole. This adjustment reveals that the 1w-1m bucket tops coincide with every single bull market top so far.

This indicator does not only suggest that the current selling activity is not at a typical bull market peak yet, it even reveals that for the first time in Bitcoin’s bull market history this trend is declining while the price continues to rise.

This is a very unusual trend in a bull market. Assuming that the price peak has not been reached yet, this suggests that profit-seekers, whether they are short- or long-term focused, are starting to hold on to their Bitcoin again, expecting higher prices to come and by that adding to the Bitcoin supply squeeze on exchanges.

Bitcoin selling activity relative to the holding period is quite low

Rafael Schultze-Kraft, Glassnode CTO, takes a similar view by looking at long-term hodlers through Coin Days Destroyed, an indicator that shows the total holding days “destroyed” by holders selling their Bitcoin.

Based on a 3-months moving average of this indicator, the destruction has retraced to a level last seen in the summer of 2019 at times where the price peak was already reached.

Ok, this is beautiful.

Experimenting with Coin Days Destroyed: Despite $BTC prices above $50k, 3-month CDD at low levels and recently declining.

Old hands extremely strong here, HODLers showing conviction and doing what they do best.

Doesn’t look like a top to me.#Bitcoin pic.twitter.com/z8OL8Gt73E

— Rafael Schultze-Kraft (@n3ocortex) April 9, 2021

If the price was close to a bull market peak, a much higher indicator value would be expected as long-term holders would be taking profit in material size, which is currently not the case.

Bitcoin spending behavior relative to the market cap is low

When taking this concept of Coin Days Destroyed further and looking at it with respect to average value destroyed in perspective to the market capitalization, one arrives at the so-called dormancy flow. This is a concept invented by analyst and trader David Puell.

The dormancy flow describes the yearly moving average of Bitcoin holders’ spending behavior. It is based on the held value that gets destroyed in perspective to the overall accrued value in the market.

This indicator suggests, the 365-day average spending behavior of Bitcoin measured in USD is very healthy and far below prior bull market spending.

This is Bitcoin rocket fuel

Bitcoin selling activity whether it is from speculators or long-term holders is declining while also the annual spending behavior relative to the market capitalization is surprisingly low. All these on-chain data points suggest that the market is inching to an even deeper supply squeeze. This is one of the best rocket fuels to send the Bitcoin price higher.

However, this is not a guarantee as it requires continuous demand for the price to appreciate in this environment. Therefore, a close eye on high-net-worth individuals and institutions’ demand should be kept, as they have recently been the main driver on the buyer side.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Nothing here should be considered investment or trading advice. Every investment and trading move involves risk. The author owns Bitcoin. You should conduct your own research when making a decision and/or consult with a financial advisor.

Funding for crypto and blockchain startups is not slowing in 2021 as VC funds appear keen to enjoy the exponential growth potential.

Venture capital funding for crypto and blockchain startups looks set to break records in 2021. As previously reported by Cointelegraph, crypto firms received more funding in the first quarter of 2021 than the whole of 2020.

Indeed, three companies in the market attracted $1.1 billion from backers in Q1 202 — a third of the total funding for crypto and blockchain firms reported in 2018. With the current bullish enthusiasm in the crypto space, VC funding appetite for blockchain startups might continue throughout the year.

This early-stage funding frenzy also appears to be spreading to the retail side with initial decentralized exchange offerings regularly becoming oversubscribed. As such, the native tokens of IDO launchpads are now some of the best-performing in the cryptocurrency space.

Blockchain private equity funding by the numbers

In Q1 2021, 129 crypto and blockchain startups received about $2.6 billion in funding, according to a Bloomberg report culled from data by business analytics firm CB Insights. This figure is already $300 million more than the total funding for such companies in the whole of 2020.

Crypto wallet provider Blockchain.com, lending outfit BlockFi and blockchain game studio Dapper Labs accounted for almost half of the $2.6 billion funding received by startups in the industry in Q1 2021. At the end of March, Dapper Labs announced a $305-million investment from sports stars and other celebrities amid growth in the sale of NBA Top Shot nonfungible tokens.

VC funding for crypto and blockchain startups in the United States has eclipsed the numbers recorded in other regions since the emergence of the crypto space, according to the recently published “Blockchain Venture Capital Report” by Cointelegraph Research. This trend is despite the lack of regularity clarity for the market in the country.

According to Jehan Chu, founder of Hong Kong-based VC investment firm Kenetic, the regulatory climate in the U.S. has done little to dissuade private equity funding for blockchain startups, telling Cointelegraph:

“Nothing is more compelling than peer pressure from the likes of Michael Saylor, Elon Musk and the stampede of institutional money charging into the market. VCs must have a position or a view on crypto, or risk missing the biggest market opportunity in a generation.”

The potential for outsized returns continues to be a driving force behind increased equity investments in crypto startups both for blockchain and mainstream VC funds. In its recently published “Blockchain Venture Capital Report,” Cointelegraph Research revealed that blockchain private equity has outperformed traditional private equity across one-, three- and five-year horizons.

Indeed, blockchain private equity performance has proven itself to be largely uncorrelated with the mainstream asset class. This trend offers some form of assurance for VC funds looking to diversify their early-stage investment portfolios.

Commenting on the basic investment thesis for VC funds in the blockchain space, Xinshu Dong, a partner at VC firm IOSG Ventures, told Cointelegraph: “Crypto is a very attractive direction with not just unparalleled growth potential but also quite promising validation, especially in the past few months from the buy-in from U.S. institutions.”

Given the marked increase in funding for crypto startups in Q1 2021, the proportion of blockchain-focused VC funding to the overall market might be set for a trend reversal. After almost peaking at 2% during the 2017 bull run, blockchain private equity fell to less than 1% of the global VC market as of the end of 2020.

This decrease can be attributed in part to the trends that emerged post-2018 bear market and the ongoing coronavirus pandemic. According to data from Cointelegraph Research, blockchain-focused VC funding dropped by 13% between 2019 and 2020, while traditional equity funding increased by 18% during the same period.

Driving force behind increased crypto funding in 2021

Since its emergence, the crypto landscape has been likened to the early days of the internet market in the 1990s and early 2000s. Where the internet boom led to the initiation and subsequent rise of sectors like e-commerce and social media, the blockchain space has been touted to drive innovations such as decentralized finance and the decentralized web.

Legacy brands that were dismissive of the promise of the then young internet space saw the rise of e-commerce and online merchants challenge the primacy of these brick-and-mortar firms in the retail arena. Social media also grew to arguably eclipse the reach of print and broadcast media as web-based services disrupted several industries.

With blockchain touted as having similar global business process disruption capabilities, several notable participants in the mainstream arena appear keen to interact with the emerging technology. This appetite for backing players in the novel arena appears even more apparent among VC firms with Dong telling Cointelegraph: “It’s an opportunity of a generation that VCs can hardly miss.”

The token economy associated with blockchain startups also offers early backers the opportunity to acquire cryptocurrencies that could appreciate in value within a short period. Even with vesting schedules that mandate a significant lock-up of these tokens for VC funds, the gains often outsize their initial equity investment.

DeFi interest and early-stage investments

Decentralized finance’s rise to prominence has offered significant expansions to the crypto market through activities like staking and protocol governance. According to Baek Kim, director of investments at VC fund Hashed: “The most important part of the crypto VC investments is that this is also an entry ticket to participate in crypto networks as a shareholder.” He added further:

“Crypto portfolios allow for investors to participate and contribute to the ecosystem in a much more engaging way than the traditional equity investments — through staking, node operations, governance proposals, liquidity bootstrapping and many more. VC participation in crypto and blockchain projects means you can be part of this paradigm shift not just as an investor but as a participant.”

This growing appetite for blockchain startups is not restricted to established players in the still-nascent crypto space. New projects, especially those in the DeFi space, are also enjoying significant interest from private equity firms looking to be early backers of the next DeFi bluechip.

In a conversation with Cointelegraph, Rob Weir, chief operating officer of upcoming DeFi platform Jigstack, attracting investments from VC funds was the easiest part of the private equity funding process. According to Weir, new blockchain projects need to consider issues such as vesting schedules and implications of token-represented equity on future price action for their native “coins.”

Weir said that balancing these key issues is essential for new projects in determining how to allocate tokens to private and public funding, adding: “VCs require a significant amount of token represented equity and consolidate a large portion of what would become selling pressure. If they deliver on their promises then they are well worth the upfront sacrifice.” He further added that “community-oriented raises leave you resource shy and carry other inherent risks.”

Early-stage backing by retail investors is also another growing trend in 2021, especially amid the gains enjoyed by projects bootstrapped on IDO launchpads. Launchpad platforms often utilize a tiered subscription package that allows holders of their native coins to gain access to project token allocations before the public listing.

According to data from cryptocurrency aggregator CryptoDiffer, the top 10 launchpad platforms in the market have recorded average returns on investment ranging between 11.3% and 68.2% thus far in 2021.

Explosive growth in asset tokenization and NFTs is fueling Web 3.0 growth, and testing DeFi resolve.

While blockchain itself provides the technology constructs to facilitate exchange, ownership and trust in the network, it is in the digitization of value elements where asset tokenization is essential. Tokenization is the process of converting the assets and rights to a property into a digital representation, or token, on a blockchain network. 

Distinguishing between cryptocurrency and tokenized assets is important in understanding exchange vehicles, valuation models and fungibility across the various value networks that are emerging and posing interoperability challenges. These are not just technical challenges, but also business challenges around equitable swaps.

Asset tokenization can lead to the creation of a business model that fuels fractional ownership, the ability to own an instance of a large asset. While discussing asset tokenization in a previous article, I also mentioned the value of an instance economy in democratizing finance, commerce and global access, as well as in creating a broader global marketplace at a scale never before seen.

With digital assets and their fungibility in a blockchain ecosystem, there are various drivers of valuation. These include: 1) tokens based on crypto economic models that are driven by supply and demand, and the utility of the network; 2) nonfungible tokens, or NFTs, which have an intrinsic value such as identification, diplomas and healthcare records — essentially, tokens that are simple proof validations of the existence, authenticity and ownership of digital assets; and 3) fungible tokens that are valued on various bases, such as the sum total of economic activity in the network (cryptocurrency), its utility (smart contracts and transaction network processing), assigned values (stable coins and security tokens), and so on.

In this article, I address the complex issue of the hyperbolic and rapid rise of NFTs, after a similarly meteoric rise of decentralized finance, or DeFi, creating amazing innovations — with immense promise of democratization, new business models and global marketplaces with global access — all fueled by the basic premise of decentralization and fundamental constructs of tokenization and wallets. While NFTs may be characterized as one-of-a-kind cryptographic tokens with some intrinsic value to a holder or to a market (art, collectibles), the NFT movement is indicative of a larger token revolution that will not only fuel massive innovation and growth in Web 3.0 protocols but also test the resolve of the DeFi movement, along with its ability to intersect and provide platforms and an exchange vehicle for all token types.

Growth in Web 3.0 protocols

The first two generations of web protocols were largely about disseminating information and connecting people. They fueled a massive growth in information and collaboration, and did wonders for connecting the world. However, those web protocols were never designed to move things of value. Also, as the Web 2.0 era reached its fullest potential, vulnerabilities such as “fake news” and the “batched relay” of the movement of assets via a series of intermediaries emerged. Threats to the commerce and financial infrastructure of the system risk destabilizing it.

Web 3.0 promises to safeguard all things we value: information, truth and digital assets — both fungible and nonfungible. Whereas Web 2.0 was driven by the advent of social, mobile and the cloud, Web 3.0 is largely built on three new layers of technological innovation: edge computing, decentralized data networks and artificial intelligence.

The growth of NFTs has not only empowered the ability for artists, skilled professionals and entrepreneurs to encapsulate innovation in a tokenized form but has also fueled the democratization of the platform as one of the promises of blockchain technology. The underlying infrastructure includes decentralized storage technologies, efficient consensus protocols, off-chain computing, and oracle networks to provide connectivity and validation to existing systems.

Collectively, the Web 3.0 set of technologies envisions a connected, trustless, accountable network for efficiently delivering value, thus crafting an infrastructure for things of worth. NFTs represent both transferable entities and nontransferable tokens that we value. The latter include things such as our identification, healthcare records and passports, things that represent us and allow us to participate in the digital economy with our own unique, digital identities.

As we dare to envision a shift toward a world with decentralized control, governance based on distributed technology that challenges every business model, and governance structure built upon centralized business frameworks, we do have to ponder some things. Not only the shift itself, but the motivation, incentive and monetization elements that fuel and power the economic infrastructure to move things that have value — thereby keeping up with our changing perception and subsequent realization of that value.

Intersecting with finance — DeFi

DeFi is the movement in the blockchain applications space that leverages decentralized network technology to disrupt and force a transformation of old financial products into trustless, transparent protocols, facilitating digital value creation and dissemination with few to no intermediaries. It is widely understood and accepted that — due to new synergies and co-creation via new digital interactions and value-exchange mechanisms — blockchain technology lays the foundation for a trusted digital transactional network that, as a disintermediated platform, fuels the growth of marketplaces and secondary markets.

While DeFi aims to deliver the promise of finance democratization, NFTs test the resolve of DeFi by delivering a competitive yet inclusive asset class, plus avenues to provide a medium of exchange, fungibility by other fungible asset classes, and liquidity to a traditionally illiquid market.

Asset classes resulting from DeFi protocols and NFTs avail themselves of the advantages of fractional ownership of the assets, blurring the lines between asset classes and using constructs like digital wallets as a receptacle for them. This is all supported by underlying layers of Web 3.0 that provide security and availability via decentralization, as well as trust and immutability via consensus, extending these principles to basic computer infrastructure like storage and interconnect.

Commercialization of Web 3.0 protocols, which manifest as fungible utility tokens, further blurs the lines with diverse financial innovation products introduced by DeFi (such as base assets and derivatives), products that are also tokenized. So, while decentralization is the underlying theme — and the wallet and the token are fundamental constructs — these blurring lines are quite profound.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

ETH

The Ethereum price is consolidating within a triangle pattern and is looking to make another drive towards the highs at $2,000. Bitcoin rallied into the weekend after the selling into a record $6bn options expiry fizzled out, giving a green light for bulls to reappear. 

The move higher comes after the amount of the coin staked reached a new high of 3.6 million ETH. 

Glassnode research noted the recent milestone in a tweet on Sunday, with the current value of the staked coins being over $6 billion. The Ethereum developers asked for fans of the project to stake their coins ahead of the upgrade to the highly-anticipated V2.0 version of the blockchain. 

The upgrade will add many improvements to the performance of the network with the most important being scalability. The coin will switch to a Proof-of-Stake consensus and improvements to the high gas fees and transactions would increase the project’s ability to attract decentralized finance (DeFi) apps. Ethereum was the go-to chain for the DeFi projects but high costs with the rise in ETH has seen others seeking to move in on the market. 

ETH is trading below the $1,800 level and a break above that, with channel resistance above, could see the coin move towards $2k once more.

USDC

Payments giant Visa has now processed a USDC payment on the Ethereum network for a new service that they plan to roll out to its partners later in the year. 

According to a press release, Crypto.com sent a USDC transaction to an account at Anchorage custody, which was owned by Visa. The Crypto.com project already issues crypto-based Visa cards and the move could signal a closer tie-up between the two. 

The latest development comes just a couple of months after the news that VISA was creating APIs for banks and financial institutions to purchase cryptos in the same fashion, using Visa and anchorage. As we suggested in the past, big corporations and banks were waiting for custody services to be introduced before they risked their capital. 

USD Coin is an ERC-20 token that was created by Centre and Coinbase with a view to create opportunities such as the Visa payments and the ecosystem should continue to expand as tokens for other fiat currencies are implemented. This is big news for the cryptocurrency industry as crypto-native tokens can build their businesses without having to worry about dealing with fiat settlements on their balance sheet.

USDC has seen its market cap explode higher in the last year with a move from $500 million to the current value above $10 billion. The Visa partnership should grow this even further as the payments processor expands its service later this year. The stablecoin is accepted by the largest crypto wallet providers. 

BCH

Bitcoin Cash could be affected by the Visa news as the cryptocurrency startup Moon, was set to bring the lightning network to all Visa merchants. 

Users can purchase a pre-paid credit card with cryptocurrencies and pay at many large e-commerce stores such as Ebay and Etsy, while any physical merchant that accepts Visa will accept it. 

BCH founder Roger Ver has had his ups and downs with Bitcoin and the Lightning Network as he initially forked the BCH coin from Bitcoin’s network in order to facilitate a solution that was closer to the Whitepaper of BTC. 

On Twitter at the end of 2020, Ver called Lightning Network a “total failure” because of the surge in usage of Wrapped BTC on the Ethereum chain. He said:

Having nearly 100x more #Bitcoin wrapped for use on #Ethereum than in #LightningNetwork shows LN has been a total failure for scaling BTC.

Wrapped Bitcoin has continued to surge and the future is setting up to become a battle with Visa trying to defend its monopoly with Mastercard as the largest payments processor in the world. The Lightning Network was introduced with the idea of adding scalability and fast transactions to BTC.

The price of BCH underperformed the rally of Bitcoin over the last year with the coin now trading at $520, which is around twice its 2020 average price. BCH will continue to be a competitor to the Lightning Network for now, and this is likely keeping a lid on the price, although gains are possible from this price level.

ANKR

ANKR capped a strong couple of months with news that the token was the latest to be listed on Coinbase. The cryptocurrency exchange said in a blog article that ANKR, CRV, and STORJ would start trading on March 23rd. 

ANKR is another Ethereum-based token that powers a distributed computing platform, where the aim is to make it easy and affordable for developers to use various blockchains. 

The project also got a boost from the recent news that it was the top validator on the Binance Smart Chain. There is plenty of competition in this space but ANKR has grabbed the early lead. 

The coin has seen a big surge from just 1 cent in February to a current high above $0.20. 

Finally, PwC has reported that cryptocurrency mergers and acquisitions activity had surged in 2020, with total deal volume more than doubling from $481 million in 2019 to $1.1 billion in the following year. 

The average deal size increased from around $19 million to almost $53 million as institutional investors scour the market for opportunities.