Bitcoin experienced some growth at the beginning of the year, but has yet to overcome resistance of the local $16,300-$17,200 range.
Consolidating above the psychological level of $17,000 is also questionable. At the same time, the broader technical picture remains the same.
Meanwhile, reports confirm that the market remains in a deep sleep. As Glassnode explains in its latest report, the BTC price has exhibited historically low volatility in recent weeks.
Volatility won't accelerate
According to the Bitcoin Network, there is currently little reason to believe that the market's boredom will change quickly. However, if a move does occur, it is likely to be an explosive market movement, just as in previous cycles when volatility was extremely low.
To support this thesis, Glassnode refers to the realized volatility over the last month for BTC fell to multi-year lows of 24.6%.
There have been several instances of such weak values in Bitcoin's history. And most of them ended with impulse growth. In only one case, in November 2018, did the price plummet lower, losing 50%.
Bitcoin network usage is low
Also, the weak baseline for Bitcoin is identified by Glassnode in continued restrained network usage. While on-chain activity increased after the FTX collapse, the uptick briefly leveled off later. The monthly average of new Bitcoin addresses is approaching the annual average again.
The overall transaction value of the network is in free fall. While the daily transfer volume was still around $40 billion in the third quarter of 2022, it is currently only $5.8 billion/day. The value is thus back at the level before the bull year 2020.
According to Glassnode, this indicates a displacement of institutional capital. This is reflected in the fact that the share of transfers of more than $10 million has fallen from 42.8% before the collapse of FTX to only 19.0%.
Glassnode argues that this is a sign of a significant lull in institutional sized capital flows and perhaps a serious shaking of confidence among this cohort. It may also partly reflect an expulsion of questionable capital flows associated with FTX/Alameda entities.
When will the market rebound?
One indicator of a breakout from boredom could be the inflows and outflows on exchanges. But again, Glassnode notes that the on-chain data does not yet signal any momentum for an explosive move. Bitcoin inflows are currently between $350 million and $400 million per day, a far cry from the billions seen in 2021-22, according to Glassnode.
According to the research firm, the Realized Cap is one of the most important metrics in on-chain analysis. Unfortunately, the metric currently gives BTC investors just as little hope for a change anytime soon. The Bitcoin Realized Cap has declined 18.8% since the all-time high, representing a net capital outflow of -$88.4 billion from the network.
"This makes for the second largest relative decline in history, and the largest in terms of USD realized losses," Glassnode notes, pointing at the following chart. Only in 2011/2012, the bear market drawdown was worse by 24%.
However, according to the company, such conditions rarely persist for long. Past instances where BTC volatility has been so low have preceded extremely volatile market conditions.
The future of cryptocurrencies remains hopeful
Former Barclays CEO Bob Diamond said in an interview with the Financial Times that digital currencies will play a significant role in finance.
He also mentions that there will be a lot of good things to come this year that will help the cryptocurrency market survive last year's collapses.
This statement was made after Diamond's Atlas Merchant investment in USDC Issuer Circle, one of the largest Stablecoins, with a valuation of $9 billion, failed to take public last year. Poor investor demand was cited as the reason.
Diamond was a well-known traditional financier in the cryptocurrency industry. In 2021, his private equity firm Atlas Merchant invested in Circle and subsequently set up a special company to buy the business.
"I don't think as an industry we're going to throw the baby out with the bathwater. In my mind there is a place for a digital currency, a very important place," Diamond said.
