Crypto Wallets Swell to 400 Million with Rising Bull Market: Chainalysis

The number of cryptocurrency wallets holding positive balances has surged past 400 million, signaling growing adoption amid the ongoing bull market.

The rally has spurred increased activity from both institutional and retail investors, with a particular focus on transactions involving dollar-pegged stablecoins, according to a Dec. 5 report from Chainalysis.

Digital Economy and TradFi Converge

The report mentioned a “seismic shift” in crypto usage and perception.

It noted a “convergence” between the digital economy and traditional finance, driven by the entry of financial institutions through exchange-traded funds (ETFs) and related products.

“The broader market has seen rallies likely driven by the introduction of crypto ETFs, as these funds provide a regulated, mainstream investment vehicle to gain exposure to cryptocurrencies.”

Meanwhile, stablecoins, which often serve as a gateway between fiat and crypto, dominate the on-chain landscape.

Since the start of 2024, they have accounted for 50% to 75% of all on-chain transactions, reflecting their integral role in the market.

While traditionally used as on-ramps and off-ramps, stablecoins are increasingly seen as stores of value, particularly in emerging economies.

In Venezuela and across Latin America, U.S. dollar-backed stablecoins are gaining traction as tools for remittances and liquidity, especially in regions grappling with limited access to dollars or strict capital controls.

The broader utility of stablecoins has caught the attention of policymakers.

U.S. Federal Reserve Governor Christopher Waller acknowledged their potential to reduce cross-border settlement costs in an Oct. 18 speech.

Likewise, U.S. Treasury’s Borrowing Advisory Committee noted their role in bolstering demand for Treasury bills in a report dated Oct. 30.

Crypto and Stock Markets Might be Overvalued

The US stock and cryptocurrency markets could be overvalued following recent rallies, according to Michael Hartnett, chief investment strategist at Bank of America (BofA).

In a recent interview with Bloomberg, Hartnett warned of a potential “overshoot” if the S&P 500 approaches 6,666 points, which would be about 10% higher than its current level, suggesting a risky bubble formation in early 2025.

Data from Bloomberg shows that the S&P 500’s price-to-book ratio has climbed to 5.3 times in 2024, nearing the record high of 5.5 observed during the tech bubble in March 2000.

While the stock market has experienced a substantial rise, investors have not yet shown signs of exuberance, according to BofA’s bull-and-bear indicator.

The S&P 500 has soared approximately 27% this year, marking its best performance since 2019.

The surge is driven by enthusiasm surrounding AI and President-elect Donald Trump’s “America First” policies.

Hartnett also mentioned the impact of Trump’s crypto stance, which contributed to Bitcoin’s temporary spike above $100,000 this week.

With Bitcoin’s market capitalization exceeding $2 trillion, it now rivals the world’s 11th-largest economy.

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