The cryptocurrency market, including Bitcoin, is facing what data analytics firm Glassnode describes as a “liquidity crisis.” Signs of this condition become evident through metrics that have reached historic lows, signaling market exhaustion. The warning was made in its most recent report released this week.
Glassnode has identified that the digital asset market is operating in a remarkably narrow trading range, experiencing compressed volatility. Furthermore, even after the recent massive sell-off that saw Bitcoin’s price hover between $25,000 and $26,000, volatility remains historically low.
The company also noted that the majority of coins sold are trading at values close to their original purchase prices, reminiscent of 2020 levels that preceded the market rally.
This lack of liquidity is also reflected in the proportion of wealth held by the most active and liquid group on the market, called “hot supply”. This group consists of the coins moved in the last week, which have currently reached historic lows.
According to the company, when we analyze the derivatives markets, we observe that futures trading volumes are also reaching record lows, averaging 12 billion dollars per day.
Bitcoin liquidity crisis
Glassnode warns that it is not surprising that the supply held by the group of long-term holders has reached a new all-time high of 14.74 million Bitcoins.
This indicates that long-term investors are increasingly less willing to spend their coins, contributing to the lack of liquidity and volatility in the market. Even whales, investors with more than 1,000 BTC, are returning to the accumulation trend.
On the other hand, the supply held by the short-term group, which represents the most active part of the market, reached its lowest level since 2011. This panorama reflects the current low market demand, which prevents a significant increase in the price of Bitcoin .
“While long-term holders are holding firm, short-term investors are operating in a risk zone, with many coins being purchased at prices higher than the current market value of around $26,000. This suggests that this group has become more sensitive to price fluctuations”, stated the company.