Behind Bitcoin’s rut: sagging volume, fading animal spirits
BNN Bloomberg
The malaise surrounding Bitcoin runs far deeper than its price.
The malaise surrounding Bitcoin runs far deeper than its price.
The world’s largest cryptocurrency has been languishing around US$47,000, well below early November’s highs of nearly US$69,000. A look under the hood helps explain why: Trading volumes have dried up, futures open interest is plunging and the number of active addresses has stalled out.
Taken together, the data paint a picture of diminished animal spirits after Bitcoin peaked following the fall launch of the first U.S. futures-tracking exchange-traded funds. Dip buyers -- a once-reliable fixture in cryptocurrency markets -- have yet to meaningfully reemerge even after a 33 per cent drawdown. Meanwhile, after billions of dollars worth of leveraged positions were flushed out in last month’s flash crash, new investors have yet to fill the void.
“There was a lot of leverage in the system in May and then in the lead-up to November,” said Jim Greco, a managing director at Radkl, a crypto-trading firm. “There could be a lot of people who got washed out and they need to be replaced by new capital.”
Saggy Volume
Trading activity in Bitcoin has trailed off as enthusiasm has ebbed. After trending lower for months, volume across exchanges clocked in at a mere US$4.8 billion on Tuesday, data from Kaiko compiled by Messari show. That’s down from US$13.1 billion a year earlier, and is well below the one-year average of roughly US$9.2 billion.
