Liquidity Drying Up in the Crypto Market
According to analytics provider Glassnode, liquidity in the crypto market is reaching historical lows, both on-chain and off-chain. This means that there is less trading activity and fewer transactions taking place. Additionally, Glassnode noted that a significant portion of the Bitcoin (BTC) supply is on the verge of experiencing significant unrealized losses.
Long-Term BTC Holders Weathering the Storm
Glassnode refers to the current situation as a “liquidity drought,” where long-term BTC holders are holding onto their coins and not spending them. This is likely because these holders have experienced both bullish and bearish markets in the past and are not concerned by the current downturn. However, those who entered the market during the last bull run may be facing losses, as BTC has declined by 63% from its peak.
Realized Value and Holder Supply Levels
Realized value settled on-chain is at extremely low levels, indicating that there is minimal profit or loss being locked in by the overall market. This suggests that most coins are being transacted at or near their original acquisition prices. Additionally, the supply held by long-term BTC holders has reached a new all-time high, while the supply held by short-term holders, who are more active in the market, is at its lowest level since 2011.
Regulatory Concerns and Market Sentiment
The crypto industry is still facing regulatory uncertainties, particularly in the United States. This lack of clarity may cause major players and institutions to take a cautious approach. Furthermore, FTX, a prominent crypto exchange, may begin selling its crypto holdings, potentially adding further downward pressure to the market. Messari founder Ryan Selkis described the current sentiment as the worst he’s ever seen, noting that bear markets tend to last longer and go deeper than expected.
Hot Take: Crypto Market Faces Liquidity Drought and Regulatory Uncertainties
The crypto market is currently experiencing a liquidity drought, with both on-chain and off-chain volumes reaching historical lows. Long-term BTC holders are weathering the storm and holding onto their coins, while the short-term holder supply has decreased significantly. Realized value settled on-chain is minimal, indicating that most coins are transacting close to their original acquisition prices. Regulatory concerns, especially in the United States, are causing uncertainty in the industry. The upcoming potential sale of crypto holdings by FTX could further impact the market. Overall, the sentiment in the market is extremely negative, with experts comparing it to previous bear markets.
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