Liquidity in the crypto market plummets, reveals recent Glassnode study

In times where the cryptocurrency market has been experiencing a lull, a report released by the renowned on-chain analysis company, Glassnode, has brought to light intriguing data about the current situation in the segment.

For those who have been following the market closely, it is no surprise that volatility has become a less frequent companion, but what surprised many was the fact that the total value of transactions reached its lowest level since 2020.

Glassnode observations indicated that even after a favorable tide at the beginning of the year, the following months saw a notable reduction in net inflows. This dynamic suggests that a scenario of stagnation and doubt has emerged in the digital asset market, making many question what the future holds for cryptocurrencies.

Amid this apparent inertia, something that caught attention was the behavior of stablecoins. After the unexpected incident with LUNA-UST in May 2022, many investors chose to withdraw their assets, resulting in a 26% drop in the total stablecoin supply. This means a drop of an impressive 43 billion dollars in the period since April of the same year.

In this scenario, while some currencies such as USDC and BUSD saw their offers decrease, Tether (USDT) stood out positively. Since November 2022, USDT supply has increased by 13.3 billion dollars. This USDT growth occurred around the same time the market saw the collapse of the FTX exchange, an event that shook the crypto world.

Another interesting fact is the behavior of volatility in the Bitcoin (BTC) market. Even with some sporadic episodes of increased volatility, the market is currently sailing in calm waters. This low volatility, associated with a reduction in the volume of transactions, led the market to a scenario that dates back to October 2020.

“The market is still in an environment of historically low volatility, which is generally a precursor to increased volatility in the future.” Glassnode

Despite reduced liquidity, more veteran investors remain firm. The Glassnode report highlighted that the amount of BTC held by long-term holders has reached a new record.

Disclaimer:

The views and opinions expressed by the author, or anyone mentioned in this article, are for informational purposes only and do not constitute financial, investment or other advice. Investing or trading cryptocurrencies carries a risk of financial loss.