Realized volatility of Bitcoin and Ethereum has fallen to extreme lows, which historically precede explosive moves in either direction. Analysts at Glassnode said.
#Bitcoin and #Ethereum markets opened the new year…by staying asleep.
Realized volatility for the two major assets fell to extreme lows, which has historically preceded explosive moves in either direction
More in our first Week On-chain edition of 2023https://t.co/wvIooBbbFl
— glassnode (@glassnode) January 9, 2023
In nine similar cases after such low realized volatility over a one-month horizon of 24.6%, a rally was observed and in only one instance a decline of 50%.
In Ethereum there have previously been only three such episodes of extremely low volatility (39.8%). In particular, in November 2018 there was a 58% drop, and in July 2020 a move toward an all-time high.
After FTX collapse there was a brief spike in the metric of new Bitcoin addresses, followed by a return to its yearly baseline. Daily on-chain transfer volume collapsed to levels seen before the 2020 bull market. The share of transactions with a value above $10 million fell from 42.8% on the eve of the FTX collapse to 19%.
Analysts say this suggests that network usage has not yet reached a convincing and sustainable recovery, and institutional investors have reduced activity. The latter may be related to waning confidence in the crypto market or divestment from questionable capital flows linked to FTX/Alameda.
In the Ethereum network, gas price has fluctuated in the range of 16–23 Gwei since September. It had previously been observed during the June–July 2021 consolidation and in May 2020 following the COVID-driven panic.
The share of MEV bots, bridges, DeFi protocols and ERC-20 tokens in gas consumption declined from 45.5% (September 2020 to September 2021) to 22.6%. The share of NFT-related transactions in the same period rose from 13% to 22%.
Realized market capitalization of Bitcoin from ATH fell by 18.8% (the second-largest peak in history) or by $88.4 billion in dollar terms (an absolute record). According to experts, the current losses are equivalent to the total invested capital since the second half of 2021.
Realized market capitalization of Ethereum from ATH collapsed by 29.2% (the second-largest peak in history) or by $67.1 billion in dollar terms (an absolute record).
«In both cases the process was painful for investors, but brought market valuations closer to their fundamental levels», — the analysts concluded.
Earlier, former BitMEX CEO Arthur Hayes expressed the view that Bitcoin has bottomed, as almost all “irresponsible” entities had run out of BTC to sell.
Nansen flagged the risks continued bearish momentum in cryptocurrencies.
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