The Bitcoin market is currently experiencing a period of stagnation, characterized by very low capital inflows and outflows. According to onchain analysis from Glassnode, researchers highlight that this inactivity could lead to increased volatility in the near future.

Glassnode Analysis Warns of Potential Volatility

A report by Glassnode with researchers Ukuria OC and Cryptovizart shows that demand for bitcoin (BTC) has decreased, as evidenced by the Realized Cap, which has stabilized over the past two months and is now at $622 billion. This metric, which reflects the net capital flowing into and out of the bitcoin network, shows that most transactions are taking place close to their initial purchase price.

“Currently, we can see that both profit and loss forces are largely equal, resulting in marginal net flows and general oscillations around the zero limit,” Glassnode said. “This suggests a level of equilibrium is being established in the market and has some similarities to the August-September 2023 period.”

On the supply side, the report notes a shrinking market, with fewer coins available for immediate trade. The proportion of “Hot Supply,” or coins held for less than a week, has dropped to 4.7% of total network assets. The researchers attribute this to long-term holders maintaining their positions and a significant drop in short-term trading activity. This has led to a tightening supply, with hodlers (long-term holders) increasingly dominating the market.

The research report further explains:

One observation is the prevalence and dominance of HODLing behavior among market participants, leading to a rapid increase in ‘reserve supply’. This suggests that the overall supply is tightening as the volume of coins available for active trading continues to decline.

While stablecoin liquidity remains high, hovering near all-time highs, this capital has yet to be deployed into risk assets like bitcoin. Glassnode analysts believe that this growing stablecoin reserve, combined with a sluggish bitcoin market, creates the potential for increased volatility. The short risk ratio, which measures profit-taking and loss-taking behavior, shows that both short-term and long-term holders are largely inactive, waiting for the next market turn.

What do you think about market stagnation and the possibility of price volatility? Please share your thoughts and opinions on this topic in the comments section below.
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