Early into 2023, we want to assess the current state of BTC’s volatility and volume following the latest capitulation wave. These dynamics surfaced in October last year when the asset confirmed severely low volume and faded volatility phase in Bitcoin price, triggering worries of an impending downside leg, which emerged early in November.
Once again, the trends of low volatility and fading volume are back. Though this might indicate another impending dip, it may confirm a decimated and complacent market many wouldn’t want to explore.
Remember, volatility touched historic lows during November last year’s capitulation phase. Sometimes market players experience the most pain when forced to wait for clearer trend shifts. Bitcoin’s price action is presenting that pain as the crypto is yet to record market volatility explosions that have authorized massive directional moves and market pivots in the past.
Despite the method used to classify, estimate, and classify BTC volume within the market, all show one thing, the asset saw the highest action in September and November last year. Since then, the perpetual and spot markets have seen steady volume declines.
Also, overall liquidity and market depth took a massive blow after Alameda and FTX’s collapse. Their fall triggered a massive liquidity crisis, which remains unfilled due to the absence of market makers in the current space.
Meanwhile, Bitcoin remains the most liquid asset in the crypto industry. However, it is still somewhat illiquid compared to some capital markets, indicating the massive crashes that BTC experienced over the past few months. In addition, faded liquidity and low market depth mean assets are susceptible to volatile shocks as relatively large, single orders may have a massive effect on market price.
On-Chain Boredom
Indeed, the current financial atmosphere has on-chain metrics flashing more market complacency. Though with continued uptrends over time, active addresses have remained relatively stagnant within the previous few months.
Glassnode’s chart shows the 14d MA of active addresses dipping under the running average within the previous year. Previous bullish markets have witnessed the active address growth outpacing the existing trend substantially.
Operational entity data from Glassnode also depicts the flaws in address data. Generally, reversing bear markets have triggered multiple factors, including increased on-chain activity and new users.
Nonetheless, when will the crypto bear market conclude? Analysts predicted that the market had experienced price-based capitulation and awaited time-based capitulation. Assessing previous BTC bear market cycles indicates two distinct capitulation phases.
Firstly, there’s a price-based capitulation, where multiple liquidations and sharp selloffs drag the asset 70-90% lower than previous ATHs. Then, the 2nd period is the lesser debated time-based capitulation. Here the market eventually starts to gain demand and supply equilibrium.
Analysts trusts we are in time-based capitulation. Though exchange rate pressures might amplify in the near term, considering prevailing macroeconomic headwinds, mid and near-term outlooks likely exhibit sustained low volatility levels, leaving HODLers and traders hoping for another exchange rate and appreciation in volatility.
Crypto Market Today
The cryptocurrency market attempted recoveries during this writing. Bitcoin seems prepared to challenge $17K after gaining 0.89% within 24 hours. The crypto traded at around $16,935 during this writing (Coinmarketcap data).
Further, the global cryptocurrency market capitalization increased by 1.21% over the past day to $823.73 billion. However, bears appear visible and ready for downward moves. So let us wait for what upcoming price actions will bring.
