Jorg Hiller
18 Sep 2024 13:22
According to Glassnode Insights, the Bitcoin market is experiencing a downturn with minimal capital inflows and outflows, which suggests that volatility is likely to increase in the future.
According to Glassnode Insights, the Bitcoin (BTC) market is currently experiencing a period of stagnation with low capital inflows and outflows. This period of inactivity has led to stagnant realized capital, indicating minimal net capital movement within the network.
The demand side is weakening
The realized capital ceiling, a key metric that measures the cumulative net capital inflows into and out of the Bitcoin network, peaked at $622 billion over the past two months. This stagnation suggests that most transactions are occurring near the original acquisition price. The net realized profit/loss metric further supports this, showing marginal net inflows oscillating around zero, indicating market equilibrium.
The overall decline in buying pressure since March is reflected in the decline in absolute realized P&L, indicating a weakening demand side. This trend reflects the market conditions seen in the period August-September 2023.
Supply side is limited
On the supply side, the ‘Hot Supply’ metric, which represents coins held for less than a week, has fallen to 4.7% of the total network wealth. This decline indicates a contraction in the supply side as more coins mature into long-term holder status, reducing the volume available for active trading.
Further analysis of the supply differential shows that HODLing behavior is dominant, with a significant increase in stored supply. This trend suggests that supply is decreasing as there are fewer coins available for trading.
Stablecoin liquidity rises
Stablecoins continue to be the preferred currencies on exchanges, with total stablecoin supply nearing an all-time high of $160.4 billion. This growth indicates that there is an accumulation of crypto-backed dollar capital, but this capital is not currently being rotated into riskier assets.
The SSR oscillator, which compares Bitcoin’s market cap to stablecoin supply, has reached a historic low, suggesting that stablecoin-based purchasing power is increasing, which could lead to improved demand going forward.
Expect increased volatility
The price action in the Bitcoin market has been within a well-defined range for the past six months, resulting in compressed volatility. Historical data shows that only August 2023 and May 2016 had a narrower 180-day price range. This compression indicates the potential for higher volatility in the future.
The Sell-Side Risk Ratio, which measures realized profits and losses relative to realized capital, has fallen below the lower value band. This suggests that minimal profits and losses have occurred within the current range, indicating that equilibrium has been reached. The short-term holder group has one of the lowest Sell-Side Risk values, which highlights the lack of new investor demand.
Likewise, the long-term holder sell risk ratio has also declined, suggesting that mature investors are slowing down on-chain interactions within the current price range.
Summary and Conclusion
The Bitcoin market is currently in a state of reduced activity. Capital flows have slowed significantly, and the realized cap has remained flat for the past two months. The supply side is tightening, with a noticeable decline in the availability of readily available coins. However, the increase in stablecoin supply suggests greater purchasing power in the future, creating a tension between current inactivity and potential future demand. This scenario suggests a potential regime of higher volatility ahead.
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