Bitcoin has continued its bearish price action as on-chain data shows that inflows into the cryptocurrency market have fallen sharply as of late.
Capital inflows into cryptocurrency have seen a notable decline recently
As explained by analyst Ali Martinez in a new after at X, capital inflows for the cryptocurrency sector have slowed over the past month. Capital enters (or exits) the digital asset market through mainly three asset classes: Bitcoin (BTC), Ethereum (ETH) and the stablecoins. Only once the inflow reaches these coins will they rotate to the altcoins.
Thus, it can be assumed that the flows associated with these assets represent the net flows for the cryptocurrency sector as a whole. As for how the flows can be calculated, the Realized Cap indicator can be used in the case of Bitcoin and Ethereum.
The Realized Cap is an on-chain capitalization model that determines the total value of a given asset by assuming that the actual value of a token in circulation is equal to the price at which it last traded on the network.
A coin’s last transaction is likely the last point at which it changed hands, so the price at that time would reflect its current cost basis. Because the Realized Cap adds this value across all tokens in the circulating supply, it essentially measures the amount of capital that investors as a whole have put into the asset.
The capital flows of Bitcoin and Ethereum can be equated with the changes taking place in this indicator. For stablecoins, this model is not necessary because their price is always around $1, so changes in their combined market capitalization serve as a sufficient method to find capital flows.
Here is the chart shared by the analyst showing the trend in the 30-day flows related to the three asset classes over the past few months:
As shown in the chart above, the overall net flows related to the cryptocurrency sector have been positive in recent months, implying that a net amount of capital has flowed into the various assets.
However, the 30-day inflow appears to have peaked last month as it has been on a downward trajectory since then. During this period, the value of the metric has fallen from $134 billion to $58 billion, a decline of more than 56%.
“This indicates a significant reduction in investment activity,” Martinez notes. The slowdown in capital inflows could be the reason why Bitcoin and other assets have recently shifted to a bearish trajectory.
BTC price
Bitcoin briefly dipped below the $91,000 mark earlier today, but it appears the coin has since returned above that as the price is now trading around $91,800.