Crypto News- Glassnode Reports; the digital asset market finds itself in the midst of a substantial liquidity squeeze, as indicated by the latest report from cryptocurrency market intelligence firm Glassnode. Both on-chain and off-chain trading volumes have plunged to historic lows, painting a picture of dwindling market activity.
Glassnode Reports Digital Assets Facing a ‘Liquidity Drought’ Amidst Bitcoin’s 26,000 Dollars Stalemate
As the market returns to a relatively narrow trading range, this decline in liquidity evokes memories of the subdued levels observed before the bullish surge of 2020, according to analysts at Glassnode. They assert that the prevailing sentiment can best be characterized as one of ‘extreme apathy and boredom.’
Stablecoins, a cornerstone of the crypto market, have experienced a persistent drop in supply since April 2022. Glassnode attributes this trend to a combination of factors, including the turmoil within the Terra ecosystem and the opportunity cost incurred due to higher interest rates that are not passed on to non-yielding stablecoins.
While both Bitcoin and Ethereum have seen a net influx of capital since the beginning of the year, all three assets have reverted to experiencing neutral or negative inflows since late August. This suggests an atmosphere of stagnation and uncertainty, as observed by Glassnode analysts.
Among the prominent stablecoins, Tether’s USDT has significantly expanded its supply by $13.3 billion since reaching its lows in November. However, USDC and BUSD have seen substantial declines, with USDC falling by $16.7 billion and BUSD plummeting by $20.4 billion.
The decline in USDC supply is likely a reflection of U.S. institutions shifting their capital to markets offering higher interest rates. Meanwhile, BUSD’s decrease may be attributed to issuer Paxos halting mints following an enforcement action by the Securities and Exchange Commission, as noted in the report.
This shift in stablecoin dynamics has led to a notable increase in Tether’s dominance within the stablecoin market, surging from 44% in June 2022 to an impressive 69%.
Despite a brief spell of turbulence at the outset of the month, Glassnode’s comprehensive on-chain metrics divulge a significant dip in the total USD volume of Bitcoin transactions, settling at a daily average of $2.44 billion. These levels harken back to the days of October 2020, with the market displaying minimal profit or loss overall, as highlighted by Glassnode analysts.
Meanwhile, in the off-chain derivatives arena, daily trading volume for Bitcoin has also touched historical lows, plummeting to $12 billion for the first time since the lows of 2022. It’s worth noting, however, that Glassnode has observed some disparity in the Bitcoin options market. Trading volumes in this segment have seen meaningful increases, albeit remaining significantly smaller in magnitude compared to futures trading. The analyst surmises that this trend may reflect the market’s preference for leveraging and optimizing capital efficiency through options, especially in the face of tighter overall liquidity conditions.