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Bitcoin’s market is currently experiencing a period of stagnation, characterized by minimal capital inflows and outflows. According to an onchain analysis from Glassnode, researchers highlight that this inactivity may lead to heightened volatility in the near future.
Glassnode’s report with researchers Ukuria OC and Cryptovizart reveals that demand for bitcoin (BTC) has diminished, as evidenced by a plateau in the Realized Cap over the past two months, now standing at $622 billion. This metric, which reflects net capital flows into and out of the bitcoin network, suggests that most transactions are occurring near their original acquisition price.
“At present, we can see that both profit and loss forces are largely equal, resulting in a marginal netflow and a general oscillation around the zero bound,” Glassnode states. “This alludes to a degree of equilibrium being established in the market and has some similarities to the Aug-Sep period in 2023.”
On the supply side, the report notes a constricting market, with fewer coins available for immediate transactions. The percentage of “Hot Supply,” or coins held for less than a week, has fallen to 4.7% of total network wealth. The researchers attribute this to long-term holders maintaining their positions and a marked decrease 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 behaviour amongst market participants, leading to a rapid increase in ‘stored supply.’ This speaks to an overall tightening supply side as the volume of coins available to actively transact continues to reduce.
While stablecoin liquidity remains high, hovering near an all-time high, this capital is not yet being deployed into risk assets like bitcoin. Glassnode analysts believe that this growing stablecoin reserve, combined with the stagnant bitcoin market, creates the potential for increased volatility. The Sell-Side Risk Ratio, which measures profit and loss-taking behavior, indicates that both short-term and long-term holders are largely inactive, awaiting the next market shift.
