Following a period of substantial capital inflows at the beginning of the year, the recent months have witnessed a shift towards either neutral or negative inflows, suggesting a period of stagnation as uncertainty took over the asset class.
According to blockchain intelligence platform Glassnode, the market has been hovering on a relatively neutral level since April this year. This aligned with the slow-down in Bitcoin and Ethereum capital inflows and reflects a growing sense of apathy and uncertainty in the market.
Heightened Volatility Soon?
Even though there was a surge in volatility during the recent drop to $26k and another one when Grayscale scored a victory against the US Securities and Exchange Commission (SEC) in court, Realized Volatility has surprisingly stayed at a consistently low level.
“Liquidity across the digital asset market continues to dry up, with both on-chain and off-chain volumes reaching historical lows. Whilst HODLing remains the market preference, a significant proportion of the supply is teetering on the edge of falling into a significant unrealized loss.”
Glassnode’s latest insight stated that the market is still in a historically low volatility environment, which is also evident across Bitcoin network settlement volumes. The total USD volume of BTC changing hands is languishing around cycle lows of $2.44 billion per day and has returned to October 2020 levels.
The market is currently experiencing minimal profits or losses, indicating that most of the coins being traded are roughly at the same price as when they were acquired. Realized Profit and Loss levels are also reminiscent of the 2020 market, emphasizing that the excitement and excessive optimism from the 2021 bull market have likely been entirely wiped out.
However, such periods of low volatility are often followed by periods of higher volatility in the financial markets – a speculation that was also indicated in the latest report, which said that the current market condition could be a “precursor to heightened volatility down the road.”
Long-Term HODLer Remain ‘Steadfast’
As on- and off-chain domains remain “exceptionally quiet,” the supply held by the Long-Term Holder cohort has reached a new peak of 14.74 million BTC.
However, the same cannot be said for the supply held within the Short-Term cohort, which represented the more active portion of the market. In fact, the latter has plunged to the lowest supply held since 2011.
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