The market for digital gold has reached a stage of extreme apathy and depletion, and volatility metrics have sunk to record lows. This conclusion was reached by analysts Glassnode.
To back up their words, experts pointed to the narrowing of theBollinger bands spread to 2.9%.
Lower readings have occurred only twice in history:
- in September 2016, when prices stood at $604 before the start of the bull market;
- in January 2023, when the price traded in a range from $52 to $16,800.
Liquidity compression (‘investor depletion’) can also be illustrated through on-chain outflows via the Realized Value indicator.
Low volatility, in this case, reflects a situation where the cost basis for most coins moved on-chain is very close to the spot price. For this reason, realized profits and losses are relatively small.
The ideal instrument for monitoring this is the Sell-Side Risk Ratio, which compares the absolute magnitude of realized losses from profits (changes in asset valuations) with realized capitalization (asset valuations).
As of now, this metric for speculators has fallen to an almost record-low. Only in 27 trading days in history (0.57%) have lower values been recorded.
“This suggests that all investors who sought to lock in profits or losses in this price range have done so. The market must take steps to stimulate new outlays (a precursor to looming volatility),” the analysts explained.
Sell-Side Risk Ratio for hodlers is also close to record lows — only in 44 trading days in history (1.1%) were values lower.
“One could conclude that volatility and price growth (in either direction) are necessary to break the ‘spell’ of apathy and depletion of investors,” — the analysts clarified.
Since the start of the year, Bitcoin has seen inflows of $16 bn (+4.1%) based on the realized capitalization indicator. Compared with 2021–2022, these are very modest figures, which may also help explain the market’s low volatility.
By decomposing the indicator mentioned above, analysts determined that the cost basis for acquiring bitcoins among speculators is $28,600, while for hodlers it is $20,300, corresponding to the indicators for these two market participant categories.
Analysts emphasised that short-term investors, on average, bought coins at relatively high prices.
The URPD indicator, which demonstrates the structure of realized price levels in the context of UTXO, shows that speculators largely formed their positions in the range from $25 000 to $31 000.
“In the grand scheme of things, such a distribution of supply resembles similar bear-market recovery periods in the past. However, on a shorter time frame, one can argue that this is somewhat ‘overloaded’ market, and many price-sensitive investors risk incurring unrealized losses,” — the experts explained.
Analysts also noted a further increase in coins in the hands of hodlers (14.6 million BTC). The indicator for speculators fell to a multi-year low of 2.56 million BTC.
“This indicates the astonishingly high conviction of Bitcoin investors remains. Very few are willing to liquidate their assets”, — the specialists concluded.
The 30-day Bitcoin volatility in annual terms has fallen to 15.5% — the lowest on record.
Earlier, Bloomberg analyst James Seyffart raised the odds of approval of a Bitcoin-based exchange-traded fund to 65%.