In the dynamic realm of Bitcoin, the ability to discern patterns and trends from raw data is invaluable. Glassnode’s latest report, “Exhaustion and Apathy,” serves as a beacon that illuminates the intricate nuances of the current state of the market. Let’s take a closer look at the numbers and their implications.
Historic Lows in Bitcoin Volatility
The overarching theme of Glassnode’s findings is the unprecedented stagnation in Bitcoin’s volatility. The data shows that the digital asset traded within a remarkably narrow range of $29,000 to $30,000. Historically, Bitcoin has been synonymous with volatility, making this current phase an anomaly.
The report underscores this by highlighting the tightness of the Bollinger Bands, noting, “The upper and lower Bollinger Bands are currently separated by only 2.9%.” Such limited movement has been a rarity in Bitcoin’s tumultuous history.
Meanwhile, the dynamics between short-term holders (STH) and long-term holders (LTH) provide a compelling story. Glassnode’s data points to a significant shift in wealth between these two cohorts. The STH’s wealth has increased by +$22 billion this year, while the LTH has witnessed an almost identical reduction of -$21 billion. This shift is not just about numbers, but also about market sentiment and strategy.
The cost basis further clarifies this dynamic. The STH cost base is up +59% YTD to reach $28.6k. In stark contrast, the LTH cost base remains significantly lower at around $20.3k. This divergence suggests that recent market entrants may be paying a premium, possibly due to FOMO (Fear of Missing Out) or speculative behavior.
Glassnode’s study of spending patterns in this low-volatility environment is also particularly enlightening. The data suggests that during such periods, most of the coins moving on the chain have a cost basis close to the spot rate, resulting in miniscule realized gains or losses.
The Sell-Side Risk Ratio, a crucial metric in this context, is languishing at an all-time low. To put it in perspective, fewer than 27 trading days (0.57%) have recorded a value lower than the current one, suggesting a market teetering on the brink of a possible volatility resurgence.
Segmented view of BTC supply
The report’s segmented analysis of Bitcoin’s supply, based on “investor holding time,” provides a layered insight into market behavior. The ‘Hot Supply’, which represents the most active coins, makes up only 2.8% of all value invested in BTC. This suggests a market dominated by holders rather than traders.
Ranging from a week to six months, the “warm supply” has seen a modest increase since the start of the year and now accounts for about 30% of Bitcoin’s wealth. The behavior of this segment is crucial because it often bridges short-term reactions and long-term beliefs.
The ‘Single-Cycle Long-Term Holders’, anchored in the 2020-23 cycle, are the behemoths, with a whopping 63% of invested capital. Their cost base, according to Glassnode, stands at $33.8k, indicating an average unrealized loss of -13.3%.
In comparison, the classic LTH cohort, which includes the long-dormant and deep HODLed offering, has a cost base of $20.4k, which translates to an unrealized gain of +43.6%. This stark contrast underlines the continued impact of the bear market in 2022 and the cautious optimism of early adopters.
Finally, Glassnode’s data-driven insights paint a nuanced picture of the Bitcoin market. The dominance of long-term holders, historic lows in volatility and clear investor apathy all point to a market in a state of stagnation. The numbers indicate a market waiting, perhaps Goldman foresees a Q2 2024 Fed Rate Cut: A Boost for Bitcoin? or an important event, to determine the next direction.
At the time of writing, Bitcoin was trading just above the 50-day EMA.
Featured image from iStock, chart from TradingView.com