Bitcoin (BTC) Market Faces Stagnation Amid Low Capital Flows

The
Bitcoin
(BTC)
market
is
currently
experiencing
a
period
of
stagnation,
characterized
by
low
capital
inflows
and
outflows,
according
to

Glassnode
Insights.
This
period
of
inactivity
has
resulted
in
a
stagnant
Realized
Cap,
indicating
minimal
net
capital
movement
within
the
network.

Demand
Side
Wanes

The
Realized
Cap,
a
key
metric
for
assessing
cumulative
capital
netflow
into
and
out
of
the
Bitcoin
network,
has
plateaued
at
$622
billion
over
the
last
two
months.
This
stagnation
suggests
that
most
transactions
are
occurring
near
their
original
acquisition
price.
The
Net
Realized
Profit/Loss
metric
further
supports
this
by
showing
a
marginal
net
flow
oscillating
around
zero,
indicative
of
equilibrium
in
the
market.

The
decline
in
overall
buy-side
pressure
since
March
is
reflected
in
the
reduced
absolute
Realized
Profit
and
Loss,
pointing
towards
a
waning
demand
side.
This
trend
mirrors
market
conditions
seen
in
the
August-September
period
of
2023.

Supply
Side
Constricts

On
the
supply
side,
the ‘Hot
Supply’
metric,
representing
coins
held
for
one
week
or
less,
has
dropped
to
4.7%
of
the
total
network
wealth.
This
decline
indicates
a
constriction
in
the
supply
side
as
more
coins
mature
into
Long-Term
Holder
status,
reducing
the
volume
available
for
active
trading.

Further
analysis
of
supply
divergences
shows
a
dominance
of
HODLing
behavior,
with
a
significant
increase
in
stored
supply.
This
trend
suggests
a
tightening
supply
side
as
fewer
coins
are
available
for
trading.

Stablecoin
Liquidity
Rises

Stablecoins
continue
to
be
the
preferred
quote
currency
on
exchanges,
with
the
Aggregate
Stablecoin
Supply
nearing
an
all-time
high
at
$160.4
billion.
This
growth
indicates
a
build-up
of
crypto-native
dollar-denominated
capital,
although
this
capital
is
not
currently
rotating
into
risk
assets.

The
SSR
Oscillator,
comparing
Bitcoin’s
market
capitalization
against
the
stablecoin
supply,
has
reached
a
historic
low.
This
suggests
increasing
stablecoin-based
buying
power,
which
could
lead
to
improved
demand
in
the
future.

Heightened
Volatility
Expectations

The
Bitcoin
market’s
price
action
has
remained
within
a
well-defined
range
over
the
past
six
months,
leading
to
compressed
volatility.
Historical
data
shows
that
only
August
2023
and
May
2016
had
a
tighter
180-day
price
range.
This
compression
indicates
a
potential
for
higher
volatility
ahead.

The
Sell-Side
Risk
Ratio,
which
measures
realized
profit
and
loss
relative
to
the
Realized
Cap,
has
dropped
below
its
low-value
band.
This
suggests
minimal
profit
and
loss-taking
within
the
current
range,
indicating
that
equilibrium
has
been
reached.
The
Short-Term
Holder
cohort
shows
one
of
its
lowest
Sell-Side
Risk
values,
highlighting
a
lack
of
new
investor
demand.

Similarly,
the
Long-Term
Holder
Sell-Side
Risk
Ratio
has
also
dropped,
suggesting
mature
investors
are
slowing
their
on-chain
interactions
within
the
current
price
range.

Summary
and
Conclusions

The
Bitcoin
market
is
currently
in
a
state
of
equilibrium
with
reduced
activity.
Capital
flows
have
slowed
significantly,
and
the
Realized
Cap
has
remained
unchanged
over
the
last
two
months.
The
supply
side
is
tightening,
with
a
notable
decline
in
readily
available
coins.
However,
the
increase
in
stablecoin
supplies
suggests
more
future
purchasing
power,
creating
a
tension
between
current
inactivity
and
potential
future
demand.
This
scenario
hints
at
a
potential
regime
of
higher
volatility
ahead.

Image
source:
Shutterstock