Glassnode, an online market intelligence firm, says the cryptocurrency market is currently experiencing a liquidity drought, with prevailing sentiment largely characterized by extreme apathy and boredom.
While on-chain and off-chain volumes have decreased, there has been a significant liquidity crunch in the cryptocurrency sector, resulting in a notable liquidity crunch in the cryptocurrency industry. Glassnode suggests that this situation is reminiscent of the pre-bull levels of 2020.
The report highlights that the supply of Bitcoin, Ether, and stablecoins has been consistently declining since April 2022. This decline can be attributed to various factors, such as the stunning implosion of the planet TerraUSD, the blockchain firm behind the algorithmic stablecoin TerraUSD.
The report notes that the failure to pass on higher interest rates to non-yielding stablecoins is also a significant contributor to the decline in the supply of these crypto assets.
At the beginning of 2023, Bitcoin and Ether had a net inflow of capital. By late August, all three crypto assets, including stablecoins, reverted to either neutral or negative inflow, as highlighted in the report, suggesting uncertainty and stagnation.
The total value of Bitcoin transactions dropped to a daily average of $2.44 billion, a resembling the levels seen in October 2020, Glassnode's on-chain metrics showed.
Bitcoin's daily trading volume recorded a historical low in the off-chain derivatives market, as it fell to $12 billion for the first time since the recorded lows of 2022.
Matteo Greco, a research analyst at Fineqia International, a publicly listed digital asset and financial tech investment firm, shares a similar analysis. As of 2020, the market's liquidity has been at its lowest levels since the end of 2020 and the beginning of 2021.
Internal' factors that scared investors and market participants and brought away liquidity and capitalization from the digital assets market, the research analyst said in a note published by International Business Times.
The crypto industry needs to grow beyond the polarization of hardcore HODLers and the risk-averse crowd, said Lixin Liu, CEO of Account Labs.
s the kind of real-world utility that could boost usage and, therefore, liquidity, Liu said.
The executive who manages the company's external relations and leads critical initiatives encompassing corporate growth, growth strategy, and finance, he said.