Digital asset market liquidity hits lowest level since 2020, report says

Posted: September 13, 2023

• The present cycle has skilled a major decline in volatility and buying and selling quantity.
• Regardless of this, long-term holders of Bitcoin continued to extend their accumulation.

With the present market cycle marked by compressed volatility and low buying and selling quantity, the full worth of on-chain and off-chain transactions within the digital asset market has fallen to its lowest degree since 2020, on-chain analytics agency Glassnode present in a brand new report. 

The on-chain knowledge supplier assessed the efficiency of main stablecoins, Bitcoin [BTC], and Ethereum [ETH], because the starting of the 12 months. It famous that after a interval of great web influx of capital when the 12 months began, the previous few months have “seen a return to impartial or unfavorable inflows, suggesting a level of stagnation and uncertainty has taken over.”

Based on Glassnode:

“All in all, it may be argued that excessive apathy and tedium greatest describe the prevailing sentiment.”

Via all of it, USDT stays king

The provision of stablecoins has steadily declined since April 2022.  The fears of a contagion impact following the sudden collapse of LUNA-UST in Could of the identical 12 months led many stablecoin holders to redeem their belongings. 

This elevated coin redemption has resulted in a 26% decline in mixture stablecoin provide, Glassnode discovered. Since April 2022, this has fallen from $163 billion to $120 billion, with a $43 billion flush-out recorded. 

Supply: Glassnode

Nonetheless, the three main stablecoins Tether [USDT], USD Coin [USDC], and Binance USD [BUSD], have been impacted in another way. 

For the reason that present cycle lows set in November 2022 when cryptocurrency change FTX collapse started, USDT’s provide has elevated by a further $13.3 billion. USDC, then again, has suffered a provide decline of $16.7 billion. 

USDC briefly misplaced its greenback peg in March 2023 after Circle, the corporate that points it, revealed that it couldn’t withdraw $3.3 billion of the $40 billion USDC reserves that have been held at Silicon Valley Bank (SVB). This precipitated panic promoting, and the stablecoin briefly traded as little as 96 cents.

Relating to BUSD, it has seen an 89% decline in provide since November 2022. Based on Glassnode, this has been “largely as a consequence of issuer Paxos moving right into a redemption-only mode following SEC enforcement.”

Supply: Glassnode

Volatility stays low within the BTC market

Following intervals of slight volatility uptick after the deleveraging occasion of 17 August and Grayscale’s victory within the courts over the Securities and Alternate Fee (SEC), BTC’s Realized Volatility has plummeted.

Glassnode discovered,

“The market remains to be in a traditionally low volatility atmosphere, which is normally a precursor to heightened volatility down the highway.” 

The decline within the quantity of whole USD quantity of cash altering palms on the Bitcoin community precisely displays the low liquidity and volatility available in the market. Based on Glassnode, that is “languishing round cycle lows of $2.44B/day and has returned to October 2020 ranges.”

Curiously, long-term holders stay resilient regardless of the on and off-chain liquidity drought. 

“The provision held by the Lengthy-Time period Holder cohort has reached a brand new ATH of 14.74M BTC. Conversely, the availability held inside the Quick-Time period cohort, representing the extra energetic portion of the market, has fallen to the bottom provide held since 2011.”