Glassnode, a prominent on-chain analytics firm, has released its latest report titled “Seeking Equilibrium,” providing insights into the current state of the Bitcoin market and offering tools to navigate the upcoming volatility.
Bitcoin Outperforms Major Commodities
The report highlights the recent uptick in global market liquidity, with digital assets and precious metals showing positive responses. However, BTC and Silver have experienced a correction of around 10.8% and 10.6%, respectively, from their 90-day highs.
Gold, on the other hand, has fared better, with only a 5.4% drawdown. WTI Crude Oil prices continue to struggle, down by 12.1% since April.
Bitcoin’s performance has remained strong, outperforming other major commodities. While it is 14.5% above the February close, it falls short of the peak performance seen in the year’s first quarter.
The market appears to be gearing up for higher volatility, as evidenced by the declining momentum and low on-chain activity. Monthly Realized Volatility had dropped 34.1%, below the 1-standard deviation Bollinger Band.
Such low-volatility regimes historically account for only 19.3% of market history, suggesting an expectation of increased volatility in the near term.
Transfer volumes on-chain have been cyclically low, indicating a decline in exchange activity. The activity ratio, comparing current exchange deposit/withdrawal transactions to the 6-month average, reveals a 27.3% drop.
Investor activity remains exceptionally light even when considering Binance only, which excludes FTX ceased operations.
Using the Net Unrealized Profit/Loss (NUPL) metric, Glassnode identifies the current market phase as an equilibrium. With a NUPL value of 0.29, it falls within the lower bound of the equilibrium phase, historically observed in around 37.5% of Bitcoin trading days. This phase typically lasts for several months.
To assess likely boundaries of near-term volatility, Glassnode introduces psychological ranges based on an investor cost basis.
The Active Investor Cost Basis stands at $33.5k, providing an upper bound price model, while the Investor Cap Price model indicates a lower bound trading at $17.65k. These models suggest potential price levels that could trigger significant psychological responses from holders.
The market currently lacks a clear direction, with prices returning to the Short-Term Holder (STH) cost basis. The STH Unrealized Profit/Loss Ratio has cooled off, indicating a balanced profit and loss position for new investors. A price contraction often follows a fall below this level, but resilient bull runs tend to find support at this point.
Glassnode presents on-chain tools to navigate the current equilibrium phase. The Supply side of Long-Term Holders (LTH) shows cyclical patterns, with spending increasing as the market breaks the previous cycle ATH. Long-term holders have demonstrated remarkable resilience during extreme volatility.
By analyzing market sentiment and LTH spending intensity, Glassnode identifies four sub-categories: Capitulation, Transition, Equilibrium, and Euphoria.
The market is in the Transition phase, with an uptick in LTH spending observed. These tools will help identify overheated conditions and monitor the behavior of Long-Term Holders as volatility unfolds.
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