Bitcoins Stagnation at $26,000 Leaves Digital Assets in a State of Liquidity Drought

The Digital Asset Market Faces Liquidity Crunch

A recent report by Glassnode, a crypto market intelligence firm, reveals that the digital asset market is experiencing a significant liquidity crunch. Both on-chain and off-chain volumes have dropped to record lows. This decline in liquidity is reminiscent of the pre-bull levels seen in 2020, indicating a prevailing sentiment of extreme apathy and boredom.

Decline in Bitcoin, Ether, and Stablecoin Flow

Stablecoins have witnessed a consistent decline in supply since April 2022. This can be attributed to various factors such as the collapse of the Terra ecosystem and the opportunity cost of higher interest rates not being passed onto non-yielding stablecoins. While bitcoin and ether saw a net inflow of capital earlier this year, all three assets have returned to neutral or negative inflows since late August, indicating stagnation and uncertainty.

Paxos halting mints following the Securities and Exchange Commission’s enforcement action, the report stated. Tether’s dominance in the stablecoin market surged to 69% as a result, increasing significantly from 44% in June 2022.

historically bad month for the industry continues.

BTC/USD price chart. Image: CoinGecko.

Hot Take: Digital Asset Market Faces Liquidity Crisis

The digital asset market is currently going through a liquidity crisis, with both on-chain and off-chain volumes reaching historic lows. This decline in liquidity is similar to the levels observed before the previous bull run in 2020, indicating a prevailing sentiment of extreme apathy and boredom among investors.

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