In the latest blog post by blockchain analytics firm Glassnode, the Bitcoin market is described as being in a state of equilibrium, with the potential for increased volatility on the horizon. The report, published on May 29, 2023, provides a comprehensive analysis of the current market conditions and offers a series of on-chain tools to help navigate the potentially turbulent times ahead.
Since October 2022, global market liquidity has seen a surge, with digital assets and precious metal prices responding positively. Bitcoin, gold, and silver are experiencing their second uptrend correction of the year. Despite a slight dip from their 90-day highs, Bitcoin continues outperforming other major commodities, remaining 14.5% above the February close.
The report suggests that the market is preparing for higher volatility. As momentum in the Bitcoin market slows, the Monthly Realized Volatility has dropped to 34.1%, below the 1-standard deviation Bollinger Band. This low-volatility regime, which accounts for only 19.3% of market history, suggests that elevated volatility may be on the near-term horizon.
On-chain activity, including exchange deposit/withdrawal transactions, has seen a cyclical decline. Recent activity has dropped by 27.3% relative to the last six months, indicating that investor activity is exceptionally light.
Glassnode’s analysis also introduces the Net Unrealized Profit/Loss (NUPL) metric to verify the current equilibrium phase. The current NUPL value of 0.29 is at the lower bound of the equilibrium phase, a zone where 37.5% of all Bitcoin trading days have been.
The report also identifies potential psychological ranges for near-term volatility. The Active Investor Cost Basis, which accounts for investors actively participating in the market, is currently trading at $33.5k, providing a near-term upper-bound price model. The Investor Cap Price model, a lower-bound pricing model, is currently trading at $17.65k.
Despite the current equilibrium, the report suggests that the market is likely to experience a shift soon. Long-Term Holder (LTH) spending has slightly increased during this correction, indicating a potential disturbance in the equilibrium. The report concludes by offering a suite of price levels and behavior patterns to monitor as the situation unfolds.