Liquidity within the cryptocurrency market is rapidly decreasing, with both on-chain and off-chain volumes reaching record lows. This information comes from analytics provider Glassnode’s most recent weekly report released on September 11.
In addition, the report highlights that a significant portion of the BTC supply is on the brink of experiencing a substantial unrealized loss. This situation is known as a “liquidity drought,” and it is causing concern among short-term Bitcoin holders.
Glassnode explains that long-term BTC holders are remaining steadfast in their holdings, spending very little of their Bitcoin. This behavior is not surprising, as long-term holders have experienced both bull and bear markets and are unfazed by temporary price fluctuations. However, those who entered the market during the last bull market may find themselves in a difficult position, as the asset has dropped 63% from its peak.
The report also points out that the realized value settled on-chain is currently extremely low. This indicates that there is minimal profit or loss being realized by the market as a whole, suggesting that most coins are being transacted close to their original acquisition price.
Moreover, the supply held by long-term holders has reached a new all-time high of 14.74 million BTC. Conversely, the supply held by short-term holders, who tend to be more active traders, has fallen to its lowest level since 2011, with 2.46 million BTC.
Regulatory uncertainty remains a significant challenge for the crypto industry, particularly in the United States. This lack of clarity may cause major players and institutions to adopt a cautious approach until there is more certainty.
Additionally, FTX, a prominent cryptocurrency exchange, is expected to start selling its crypto holdings on September 13. This could exert further downward pressure on the market, which is already experiencing a retreat this week.
Commenting on the current sentiment, Ryan Selkis, the founder of Messari, stated that it is the worst he has ever seen. Selkis believes that bear markets tend to last longer and have more significant declines than anticipated. He suggests that the market may need a few capitulations, followed by a period of consolidation before experiencing a recovery.
In terms of market performance, the total capitalization has plummeted to its lowest level since mid-March, dropping to $1.04 trillion during early trading in Asia on Tuesday. The last time the market fell below the psychological $1 trillion mark was on March 11. Although there has been a slight recovery in the past few hours, bringing the total cap back to $1.06 trillion, the bears are still active. Bitcoin (BTC) and Ethereum (ETH) have experienced respective declines of 0.6% and 2%, while altcoins are facing even greater pain.
It is crucial to note that the current state of the market is causing concerns for investors and traders alike. The decline in liquidity and overall market performance raise questions about the future trajectory of cryptocurrencies and the impact of regulatory developments.
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About the author - J-S Tremblay
I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...
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