Bitcoin’s luster fades as dip buyers dwind. The dissatisfaction with Bitcoin extends far beyond its current price level.
The world’s most valuable cryptocurrency has been hovering around $47,000. A significant drop from its all-time high of about $69,000 reached in early November. A look behind the hood provides some insight into why. Volatile trading volumes have dried up, futures open interest has plummeted. And the number of active addresses has reached a stalemate.
When taken together, the data depict a picture of dwindling animal spirits. After Bitcoin reached its all-time high following the fall introduction of the first U.S. exchange-traded funds. That track futures prices. Dip buyers, who were once a dependable fixture in cryptocurrency markets. Have yet to reappear in significant numbers, despite a 33 percent decline in the price of bitcoin. New investors have yet to step in to fill the hole left by last month’s flash crash. Which resulted in billions of dollars’ worth of leveraged positions being flushed out of the market.
A managing director at Radkl, a cryptocurrency trading firm. Stated, “There was a lot of leverage in the system in May, and then again in the lead-up to November.” “It’s possible that a large number of individuals have been displaced. And that they must be replaced by new capital.”
Saggy Volume of Bitcoin’s Luster
Trading activity in Bitcoin has slowed as investor interest in the cryptocurrency has waned. According to data from Kaiko gathered by Messari. Transaction volume across exchanges reached a low of $4.8 billion on Tuesday. The lowest level in several months, according to the data. This represents a decrease from $13.1 billion a year earlier and is significantly lower. Than the one-year average of approximately $9.2 billion.
Since Dec. 4, when the price of Bitcoin dropped more than 20 percent in a couple of minutes. In a show of the cryptocurrency’s famed weekend volatility, the total volume of transactions. Has remained below $10 billion. According to data from Coinglass.com, around $2.4 billion in cryptocurrency exposure. Both long and short, was liquidated during the dip.
In the final hours of the year, “we saw a number of U.S. funds, prop shops, and hedge funds. Put risk back on,” said Aya Kantorovich, head of institutional coverage at FalconX. “However, this year, what we’ve observed is volumes. Are somewhat down as opposed to the beginning of last month,” she added. We’re still wrestling with the question of whether we should be risk-off. Or risk-on, according to the analyst.
The futures market follows suit. Open interest in Bitcoin futures contracts. On the Chicago Mercantile Exchange has dropped by 39% since late October. When it peaked at $17.4 billion.
The first US Bitcoin futures ETF, which debuted in mid-October. It was one of the most actively traded ETFs ever. After garnering almost $1 billion in only two days, the ProShares Bitcoin Strategy ETF (ticker BITO). Now has $1.2 billion in assets under management.
According to BitOoda’s chief strategy officer and head of research Sam Doctor. The fund debut corresponds substantially with rising CME open interest. We expect OI to rise again as the holiday season winds down.
Active addresses growth has also slowed amid the gloom. The total is now about 971,000, down from 1.2 million. A year ago, according to Messari’s CoinMetrics data.
Kantorovich fears a repeat of December’s flash catastrophe for Bitcoin’s Luster.
“Less active addresses equal more assets in cold storage. “Liquidity across order books falls as Bitcoin becomes less tradeable,” Kantorovich added. “I believe we could see a flash crash that deleverages the open interest in the market quickly. Like we experienced in December.”