Source: Golden Ten Data
Bitcoin's current trading volume is less than one-fifth of the peak volume of the 2021 bull market, which may suggest that no one wants to sell it.
Although the price of Bitcoin rose above $70,000 on Monday, actual transaction activity on the Bitcoin blockchain is still “staggering” rather than at full speed.
According to a research firm, this difference partly reflects strong holding sentiment in the market.
Analysts at Blockware Solutions said, “The average on-chain volume (in dollars) is far below the peak of the 2021 bull market, which may suggest — no one wants to sell.”
Data tracking company Glassnode defines transaction volume as the dollar value of the total amount of bitcoins transferred on-chain, and this indicator only considers successful transfers.
According to data tracked by Glassnode, Bitcoin's 7-day and 14-day average trading volume was below $200,000 as of Monday, far from $1 million and above during the 2021 bull market.
Wall Street's popularity for spot Bitcoin ETFs listed on the NASDAQ is the main reason for Bitcoin's recent rise. In other words, spot trading volume is likely concentrated in ETFs, which also explains the low volume of on-chain transactions.
Despite this, other metrics also indicate that investors who survived the 2022 bear market are continuing to hold their tokens and expect the price to continue to rise.
Several analysts expect Bitcoin's price to rise to six digits over the next few months, eventually peaking well above $150,000.
Blockware analysts said, “Once we see that prices actually begin to fluctuate, that is when on-chain transaction volume surges, old bitcoins will be transferred to exchanges for sale. Until then, lower on-chain volumes were a sign of insufficient supply-side liquidity.”
On Wednesday, the price of Bitcoin once fell to a low of around $60,800. Alex Thorn, head of research at Galaxy Digital, said that this decline “is completely in line with the normal short-term adjustment of the historical bull market.”
The reason for Monday's sharp rise is unclear, but the cryptocurrency's price action in March was characterized by a record high followed by a healthy pullback. Thorn hinted that investors are suspending the sale of spot Bitcoin ETFs. He said, “The record outflow of GBTC funds over the past two weeks may have been caused by the bankruptcy and liquidation of Genesis and Gemini, which led to the weakening of spot ETFs, but some technical indicators show that sellers are exhausted.”
Sam Callahan, chief analyst at Bitcoin service company Swan Bitcoin, believes that Bitcoin's sharp rise yesterday may be related to the information issued by the Federal Reserve last week. He said:
“Federal Reserve officials made it clear last week that they are considering cutting interest rates this year and slowing the pace of quantitative austerity programs. These measures will improve liquidity conditions and act as a positive catalyst for asset prices. Bitcoin, as a barometer of the liquidity situation, has responded positively to the Federal Reserve's message that monetary policy may relax in the near future.”
Editor/jayden