A Shift Towards Neutral or Negative Inflows
After a period of significant capital inflows earlier this year, recent months have seen a change in the cryptocurrency market. There has been a shift towards either neutral or negative inflows, indicating a period of stagnation and uncertainty in the asset class.
According to blockchain intelligence platform Glassnode, the market has been hovering at a relatively neutral level since April. This aligns with the slowdown in capital inflows for Bitcoin and Ethereum, reflecting a growing sense of apathy and uncertainty among investors.
Heightened Volatility on the Horizon?
Despite recent moments of volatility, such as the drop to $26k and Grayscale’s victory against the SEC, realized volatility has remained consistently low. Liquidity in the digital asset market is drying 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 highlights that the market is currently experiencing historically low volatility, as seen in Bitcoin network settlement volumes. The total USD volume of BTC changing hands is at its lowest levels since October 2020.
The market is currently stagnant, with minimal profits or losses. Most traded coins are at similar prices to when they were acquired, suggesting that excitement and optimism from the 2021 bull market have faded away.
However, periods of low volatility are often followed by increased volatility in financial markets. Glassnode suggests that the current market condition could be a precursor to heightened volatility in the future.
Long-Term Holders vs. Short-Term Market
As both on-chain and off-chain domains remain quiet, the supply held by long-term holders has reached a new peak of 14.74 million BTC. These holders are steadfast in their commitment to holding their assets.
On the other hand, the supply held by short-term holders, who represent the more active portion of the market, has dropped to its lowest level since 2011.
Hot Take: Uncertainty Looms Over Cryptocurrency Market
The cryptocurrency market is currently experiencing a period of stagnation and uncertainty. Capital inflows have shifted towards neutral or negative territory, reflecting apathy and uncertainty among investors. Realized volatility remains low despite recent moments of volatility. Liquidity in the market is drying up, and trading volumes have reached historical lows.
Long-term holders remain steadfast in their commitment to holding their assets, while short-term holders’ supply has decreased significantly. This period of low volatility could potentially be a precursor to heightened volatility in the future. Overall, uncertainty looms over the cryptocurrency market as it navigates through this stagnant phase.
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