In Brief
Glassnode notes that the Bitcoin market is still adjusting to its new price range, liquidity conditions are tightening, and Long-Term Holders remain inactive, which contribute to a sluggish market.
Cryptocurrency market analytics firm Glassnode recently shared insights on social media platform X, noting that the Bitcoin market is still adjusting to its new price range after experiencing a -30% correction. Liquidity conditions are also tightening in both on-chain and futures markets.
Furthermore, Bitcoin’s Long-Term Holders remain inactive, which further contributes to a sluggish market and sideways price movement.
According to Glassnode’s latest report, the digital asset market has faced downward pressure in recent weeks, with Bitcoin’s price dropping from around $97,000 in late February to approximately $82,000 today. A noticeable contraction in liquidity seems to be taking place, which is contributing to the decline in valuations. Net capital inflows into Bitcoin are slowing, with the Realized Cap growing at a mere +0.67% per month.
From this, Glassnode identifies two main takeaways: First, there is a lack of new capital entering the market to support higher prices. Second, volatility expectations remain high, as the market transitions from a profit-driven phase to a more neutral equilibrium.
The wealth held by the Hot Supply cohort, which includes coins aged one week or less, has dropped from 5.9% of the circulating supply to just 2.8%. This represents a more than 50% decrease in liquid circulating coins, indicating reduced interest in trading and speculation.
A similar trend is evident in the inflow volumes to exchanges, the central hubs of trading activity. Inflows to all exchanges have decreased from +58.6k BTC/day during the market peak to +26.9k BTC/day now, a decline of over -54%. This decline aligns with the observed decrease in investor sentiment and market capital flows. Additionally, the reduction in both Hot Supply and Exchange Inflows suggests a weaker overall demand-side pressure.
Meanwhile, the derivatives market has experienced the highest trading volume among all market sectors. When looking at the open interest in futures contracts, a drop has occurred in recent months. Open interest has fallen from $57 billion at the market’s all-time high to the current $37 billion, a decrease of -35%. This suggests a reduction in speculation and hedging activity, reflecting similar patterns of decreased activity seen in on-chain markets.
Glassnode notes that a noticeable decline in speculation activity across digital assets is now evident, with investors adopting a more risk-averse approach. This is reflected in the contraction of liquidity across both on-chain and futures markets. Additionally, the options market continues to place a higher premium on downside protection.
Short-Term Holders Face Losses, While Long-Term Holders Remain Patient
When analyzing investor reactions to volatility, two contrasting trends emerge. First, Short-Term Holders are experiencing some of the largest losses of the cycle, reflecting a certain level of fear and uncertainty. In contrast, Long-Term Holders (LTH) have reduced their spending, indicating a shift away from sell-side distribution and possibly towards a more patient approach of accumulation and holding.
By examining the percentage of the total LTH balance sent to exchange addresses, a clear, though brief, spike in distribution is visible as the market dipped into the low-$80,000 range. This indicates that some long-term investors chose to de-risk, taking profits off the table during the increased volatility. However, the frequency and size of each distribution wave seem to be decreasing. This could imply that LTHs are nearing the end of their sell-side activity within this price range.
Glassnode notes that the amount of profit realized by LTHs during this cycle is similar to previous cycles, highlighting the large volume of sell-side pressure the market has absorbed. Despite this, it is important to note that LTHs still control a relatively large portion of the total wealth, especially considering this later stage of the market cycle. This could suggest a unique market dynamic ahead, as a considerable amount of capital remains tightly held.
Disclaimer
In line with the Trust Project guidelines, please note that the information provided on this page is not intended to be and should not be interpreted as legal, tax, investment, financial, or any other form of advice. It is important to only invest what you can afford to lose and to seek independent financial advice if you have any doubts. For further information, we suggest referring to the terms and conditions as well as the help and support pages provided by the issuer or advertiser. MetaversePost is committed to accurate, unbiased reporting, but market conditions are subject to change without notice.
About The Author
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
Alisa Davidson
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
