Bitcoin (BTC) is has risen sharply in the past few days, as have many other cryptocurrencies. But when we zoom out, the volatile asset is still consolidating. According to Glassnode, that could be good news for the market in 2023. After rain comes sunshine, and after a prolonged lack of volatility comes explosive price changes.
Bitcoin volatility very low
In this year’s first update on Bitcoin’s on-chain situation Glassnode It’s about the fact that bitcoin’s volatility has rarely been as low as it is now. Between December 17 and January 8, the price only changed by $550, and volatility was already limited before that. That doesn’t necessarily mean the bear market is over. Instead, it suggests that volatility could start to grow. This can mean price increases, but also price decreases.
This lack of price changes is reflected by on-chain data, which is very ‘soft’ for both bitcoin (BTC) and ethereum (ETH). So people are less likely to send their coins to other addresses. That will mean, in part, that they don’t expect rates to change for now – but history shows that this is exactly what often happens next.
There appear to have been only five periods for bitcoin when volatility was as low or lower. One of those periods led to a 50% crash in a single month, so hard falls are also possible.
On-chain data shows silence
The amount processed by the Bitcoin network has not been this low since 2020. This will partly be because prices have fallen sharply, making coins simply worth less. It can also indicate that institutions have already moved their money.
The Ethereum network shows similar details. The total gasconsumption has fallen sharply. The bear market in Non-Fungible Tokens (NFTs) was a major cause of this. The minting and sending of these tokens accounted for a large part of the gas volume, but this subgroup of consumption has already fallen by about half.
‘Bridges’ were another major cause. 2022 was marked by a large number of hacks. The bridges connecting the different blockchain networks were a major target. The gas volumes of bridges have decreased from 8% of the total to less than 1%. The hacks will have had a big finger in the pie.