With the recent performance of Bitcoin, various anticipations have been made about the market. In its recent weekly report titled “Exhaustion and Apathy,” Glassnode has commented on the ongoing trends across different sized investors and their behavior.
According to the report, both the magnitude and gradient of the realised cap suggest that over $16 billion in value (+4.1%) has flowed into Bitcoin YTD. However, the climb is quite shallow when compared with the steep rise seen during the 2021-22 uptrend indicating that while capital is flowing in, it is doing so at a very modest pace.
Additionally, the report reveals few statistics upon breaking the realised cap into the Long-Term and Short-Term Holder components. Notably, the wealth controlled by the STH cohort has experienced an increase of +$22 billion this year, whereas the LTH cohort has seen an approximately equal reduction of -$21 billion. This suggests two theories:
- Short-Term Holders chasing the market higher, creating an elevated average cost basis.
- Supply acquired at prices below $24,000 in the first quarter is maturing into LTH status, resulting in a declining average cost basis.
Furthermore, Glassnode writes that the supply held by Long-Term Holders continues to increase, hitting an ATH of 14.6 million BTC. This is in clear contrast to Short-Term Holder supply which has declined to multi-year low of 2.56 million BTC.
Overall, this suggests that conviction of Bitcoin investors does remain impressively high, and a small portion is only willing to liquidate their holdings.
Now, addressing one of the must surprising trends from the past weeks, the Bitcoin volatility which has maintained record low figures. To this, Glsssnode suggests a different metric called volatility compression (investor exhaustion) to measure the volatility. This metric is studied via the spending behavior of investors and the realised value suggests:
- High volatility motivates investors to spend coins that were acquired at a cost basis much higher (in loss) or lower (in profit) than the spot exchange rate.
- Low volatility (and investor exhaustion) results in most coins moved on-chain having a cost basis very close to the spot rate (and thus realized very small profit/loss).
Now, another metric to monitor this is the Sell-Side Risk Ratio, which compares the absolute value of realized profit loss (the change in asset valuation) to the realized cap (asset valuation). For STHs, Glassnode report suggests that this metric is effectively at all-time lows, with lesser than 27 trading days (0.57%) recording a lower value.
This suggests that investors who wanted to enjoy profits or losses at the current prices have already done so. On the other hand, the Long-Term Sell-Side Risk Ratio is also pushing towards all-time-lows, with only 44 trading days (1.1%) recording a lower value.
In large, this suggests that volatility and price expansion (in either direction) is likely required to break this spell of investor apathy and exhaustion which leads to the title of the report.
It is worth noting that while the Bitcoin market is largely stable, movement could be experienced in either direction. With the historic low volatility, investors have been reaching an all-time-low in willingness to spend coins on-chain.
Simultaneously, the conditions of the Bitcoin market continue to show signs of the bear market hangover seen in previous cycles, with a significant wealth owned by long-term high conviction holders.
However, with this historic low volatility comes apathy and exhaustion, which often entails a relatively weak influx of demand. While the realized cap is increasing, it has been very slow and sideways market may remain on the road ahead.