Bitcoin (BTC) recently soared past the $50,000 mark for the first time since December 2021 and has remained on the rise, currently trading above $51,900. Analysts from on-chain intelligence platform CryptoQuant have attributed the asset’s rise to high demand from the recently approved spot Bitcoin exchange-traded funds (ETFs).
According to CryptoQuant’s latest weekly report, an estimated 75% of new money invested into BTC is coming from ETFs, excluding Grayscale’s GBTC.
Bitcoin ETFs Are Driving BTC’s Surge
As fresh money enters the market, Bitcoin’s market cap has touched $1 trillion, with the realized capitalization reaching $454 billion, hovering under its all-time high of $468 billion from April 2022. The realized capitalization metric measures the amount of money invested in the leading ecosystem.
The rise in realized capitalization signals demand ahead of major catalysts like the upcoming Bitcoin halving in April, indicating a bullish outlook for the mid-term.
It is worth noting that the amount of new money that has been flowing into Bitcoin is growing at the highest annual rate since mid-2022. The realized cap has also increased by $71 billion in the past year, a sign of rising investment flows and a potential surge in BTC’s price.
The impact of spot Bitcoin ETFs on BTC demand is evident in the substantial portion of the fresh inflows entering the market through the products. Analysts found that $9.5 billion, representing 2% of the total money invested in Bitcoin historically, has come in through the ETFs.
“This is positive for price gains as long as the current rate of Bitcoin demand from these ETFs continues, but can be a risk if demand eases or if we start to see some outflows from these ETFs,” CryptoQuant said.
BTC’s Short-term Price Target
While BTC continues its surge, CryptoQuant has placed the asset’s short-term price target at $56,000 based on the network activity valuation. Analysts believe the target level represents the Metcalfe Price Valuation Band, a metric that evaluates BTC’s price based on active user addresses.
The Metcalfe band signaled a resistance level in April and November 2021 and April 2022, indicating a correction risk around those prices at the time.
Meanwhile, BTC’s price can increase further as unrealized profit margins are still low, hovering around 17%, compared to 30%-40% when the ETFs started trading a month ago.
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