Blockchain
Bitcoin (BTC) profitability is solid despite declining market volumes
Despite the choppy price movement, Bitcoin (BTC) investors’ unrealized profit remains constructive. However, volumes in all aspects of the market are decreasing significantly as a balance has been established between demand and sales forces, according to Glassnode Insights.
Market profitability remains solid
Sideways price movement tends to manifest as investor boredom and apathy, which seems to be the dominant response across all Bitcoin markets. BTC prices are consolidating within a well-established trading range. Investors remain in a generally favorable position, with more than 87% of circulating supply held at profit, with a cost base below the spot price.
Using the MVRV metric, the average coin holds an unrealized profit of approximately +120%, typical of legacy markets trading around the previous ATH cycle. The MVRV ratio remains above its yearly baseline, suggesting that the macro uptrend remains intact.
Currently, the price of BTC is stabilizing and consolidating between the 0.5 and 1 standard deviation range. This once again highlights the statistically high profit that the average investor holds despite the recent unstable market conditions.
Lackluster volume
Despite the good profitability of investors, the size of the volume processed and transferred on the Bitcoin network after ATH has decreased dramatically. This underlines a reduced appetite for speculation and greater indecision in the market.
A similar story can be observed when evaluating spot volume traded on major centralized exchanges. This demonstrates the strong correlation between on-chain network settlement volumes and trading volumes, echoing a feeling of ennui among investors.
Trading activity collapses
Moving one level deeper, on-chain inflows to exchanges in a BTC denomination show a notable reduction in activity. Short-term holders are currently sending approximately +17.4k BTC/day to exchanges, markedly lower than the peak of +55,000 BTC/day seen when the market reached the $73,000 ATH in March. In contrast, the distribution of long-term holders across exchanges is relatively low, with only a marginal 1k+ BTC/day in inflows currently.
Currently, more coins are being transferred into the profit position (+11,000 BTC) than into the loss position (+8.2,000 BTC), suggesting that overall a profit-oriented trend remains, albeit by a relatively small margin. The average coin sent to exchanges is making a profit of around +$5.5k and a cut of -$735 for coins sent at a loss. This implies that HODLers are still disinvesting and that demand is sufficient to absorb sell-side pressure, but not large enough to push market prices higher.
Cash and Carry Operations
Another tool that allows the characterization of spot markets is the Spot Cumulative Volume Delta (CVD). This metric describes the net bias between the buying and selling volume of market buyers, measured in USD. At present, the spot market is dominated by a clear sell-side trend, however, the market continues to move sideways, indicating that the demand side is approximately equivalent to the sell-side pressure, keeping the market range limited.
In the futures market, there is a sustained increase in open interest, currently above $30 billion, just below its previous high. However, a substantial portion of this open interest is tied to market-neutral cash-and-carry trading. The notable growth in open interest on the CME Group stock exchange highlights a growing presence of institutional investors. The CME Group exchange currently hosts over $10 billion in OI, representing just under a third of the global market share.
Despite growing opening interest, futures trading volumes saw similar declines as spot markets and on-chain transfer volumes. This suggests a relatively light appetite for speculation and greater dominance by set-and-forget trading and arbitrage positions.
Summary and conclusions
Despite the volatile and sideways market conditions, the average Bitcoin investor has remained largely profitable. However, investor resolve has waned, as indicated by contraction in volumes in spot, derivatives and on-chain settlement markets.
It appears that a balance has been established on both the demand and sales sides, resulting in relatively stable prices and a notable lack of volatility. This stagnation in market movements results in a certain degree of boredom, apathy and indecisiveness on the part of investors. Historically, this suggests that a sharp price movement in either direction is needed to stimulate the next round of market activity.
Disclaimer: This report does not provide any investment advice. All data is provided for informational and educational purposes only. No investment decisions will be based on the information provided here and you are solely responsible for your own investment decisions.
The exchange balances presented are derived from Glassnode’s comprehensive database of address labels, which are accumulated through both officially published exchange information and proprietary clustering algorithms. While we strive for maximum accuracy in the representation of foreign exchange balances, it is important to note that these figures may not always encapsulate the entirety of an exchange’s reserves, particularly when exchanges refrain from disclosing their official addresses. We encourage users to exercise caution and discretion when using these metrics. Glassnode will not be held responsible for any discrepancies or potential inaccuracies.
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