The world’s largest cryptocurrency has been hovering around US$47,000, well below the high of nearly US$69,000 in early November.
The discomfort surrounding Bitcoin is far deeper than its price.
The world’s largest cryptocurrency has been hovering around US$47,000, well below the high of nearly US$69,000 in early November. In-depth understanding helps explain why: trading volume has dried up, open interest in futures has plummeted, and the number of active addresses has stagnated.
All in all, these data paint a picture of the diminished animal spirit after Bitcoin peaked after the launch of the first US futures tracking exchange-traded fund in the fall. Even after a reduction of 33%, Dip buyers-once reliable fixtures in the cryptocurrency market-have yet to reappear meaningfully. At the same time, new investors have not yet filled the gap after billions of dollars in leveraged positions were written off in the flash crash last month.
Jim Greco, managing director of the crypto trading company Radkl, said: “There is a lot of leverage in the system in May, and then before November.” “There may be a lot of people who will be eliminated and they will need new capital. replace.”
As the enthusiasm fades, Bitcoin transaction activity also decreases. Data from Kaiko compiled by Messari shows that after several months of declines, the trading volume on the exchanges on Tuesday was only 4.8 billion U.S. dollars. This is down from the 13.1 billion USD a year ago and well below the one-year average of approximately 9.2 billion USD.
Since December 4th, the transaction volume has not exceeded 10 billion U.S. dollars, when the price of Bitcoin plummeted by more than 20% in a few minutes, showing Bitcoin’s notorious weekend volatility. According to data from Coinglass.com, approximately $2.4 billion in long and short cryptocurrency exposures were liquidated during the decline.
“We have seen some U.S. funds, prop stores and hedge funds basically take risks again in the last few hours of this year, but this year we have seen a relative decline in transaction volume compared to the beginning of last month,” FalconX Agency Reporting Director Aya Kantorovich Say. “I think what we are seeing is still the question,’Are we taking risks or are we taking risks?'”
The futures market tells a similar story. After soaring to a record high of US$17.4 billion at the end of October, the open interest in the Chicago Mercantile Exchange’s Bitcoin futures contract is now approximately US$10.6 billion, a 39% drop.
Driving the rise is the expectation of the first US Bitcoin futures ETF, which made its debut in mid-October and became one of the funds with the largest trading volume on record. However, the enthusiasm quickly faded-after attracting more than $1 billion in funds in just two days, the ProShares Bitcoin Strategy ETF (stock code BITO) has assets under management of $1.2 billion.
BitOoda Chief Strategy Officer and Head of Research Sam Doctor wrote in a report: “The launch of the fund is closely related to the increase in CME open interest, because AUM increased rapidly in the first week after launch.” Open interest” It recently fell back to the level before the ETF was launched in the last week of December, but we expect OI to climb again after the holiday.”
In the case of malaise, the growth of active addresses (a measure of transaction activity) has also stagnated. CoinMetrics data compiled by Messari shows that the current number is about 971,000, which is lower than the 1.2 million a year ago.
For Kantorovich, this may lay the foundation for a short-term, sharp liquidity crunch similar to the December flash crash.
“The fewer addresses you have, the more assets you have stored in cold storage. The lower the tradability of Bitcoin, as the liquidity between the order books decreases, you can expect the volatility of the exchange to decrease. The bigger,” Kantorovich said. “I think you will see a very rapid, very short-lived flash crash, which will deleverage the open positions in the market very quickly, similar to what we saw in December.”