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After a phase of significant capital inflows at the start of the year, recent months have shown a transition towards either neutral or negative inflows, indicating a period of stagnation as uncertainty has taken hold of the asset class.
As reported by blockchain intelligence platform Glassnode, the market has been maintaining a relatively neutral stance since April of this year. This coincided with the slowdown in capital inflows for Bitcoin and Ethereum, reflecting an increasing sense of indifference and uncertainty within the market.
Is Increased Volatility Imminent?
Despite a spike in volatility during the recent decline to $26k and another surge when Grayscale achieved a legal victory against the US Securities and Exchange Commission (SEC), Realized Volatility has unexpectedly remained at a persistently low level.
“Liquidity in the digital asset market continues to diminish, with both on-chain and off-chain volumes reaching historic lows. While HODLing remains the preferred strategy, a considerable portion of the supply is on the verge of experiencing significant unrealized losses.”
According to Glassnode’s latest analysis, the market is still situated in a historically low volatility environment, which is also reflected in Bitcoin network settlement volumes. The total USD volume of BTC transactions is stagnating around cycle lows of $2.44 billion per day, reverting to levels seen in October 2020.
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The market is currently witnessing minimal gains or losses, suggesting that most coins being traded are approximately at the same price point as when they were purchased. Realized Profit and Loss metrics are also reminiscent of the 2020 market, highlighting that the enthusiasm and excessive optimism from the 2021 bull market have likely been completely eradicated.
Nevertheless, such phases of low volatility are frequently succeeded by periods of heightened volatility in financial markets – a speculation that was also noted in the latest report, which stated that the current market conditions could serve as a “precursor to increased volatility in the future.”
Long-Term HODLers Remain ‘Steadfast’
As both on- and off-chain activities remain “exceptionally quiet,” the supply held by the Long-Term Holder group has reached a new high of 14.74 million BTC.
Conversely, the same cannot be said for the supply held by the Short-Term group, which represents the more active segment of the market. In fact, this supply has fallen to the lowest level recorded since 2011.
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