The latest report from Glassnode paints a picture of investor apathy in the Bitcoin market, as volatility, trading volumes, and realized values reach multi-year lows.
However, despite this apparent disinterest, a closer look reveals that HODLers are continuing their slow and steady accumulation, especially with the highly anticipated halving event less than a year away.
The overall state of the market can be summarized as experiencing a period of low volatility, thin liquidity, and investor disengagement. BTC supply is flowing out of exchanges, miners, and whale wallets, finding its way into the hands of HODLers of all sizes.
Bitcoin’s Price Swings Fail to Make Progress
Price movements in the Bitcoin market over the past week have been volatile but with little overall progress. The market saw a dip to $24.8k followed by a rally to $26.7k on news of Blackrock’s ETF application, only to settle back near the opening at $26.3k.
While intra-week volatility was evident, the broader market trajectory appears stagnant. Comparisons with previous cycles reveal that such quiet periods are rare and often occur during the apathetic phase following a bear market.
This aligns with the observations of market apathy in the previous week. Realized volatility over the past month has reset to 39.6%, one of the lowest levels since the 2021 bull market.
Implied volatility in option contracts across various timeframes has also hit cycle lows. Short-term 1-week implied volatility stands at its second-lowest value on record (36%), while 3-month and 6-month contracts reached all-time lows of 42% and 46%, respectively.
Futures trading volumes have declined to $20.9 billion per day, indicating a drain in liquidity across digital asset markets. Similar trends are observed in Ethereum futures markets, suggesting an industry-wide contraction.
On-chain data further reinforces the thin liquidity narrative. The absolute value of profit and loss events has dropped to cycle lows of $268 million, reminiscent of October 2020 levels. This illustrates the subdued capital flows both into and out of the asset class throughout the year.
HODLers Absorb a Significant Supply of Bitcoin
Meanwhile, HODLers continue to accumulate Bitcoin steadily. Their accumulation rate currently stands at around 42.2K BTC per month, indicating a significant absorption of available supply by this price-insensitive group.
This pattern of gradual accumulation started over two years ago and suggested that another 6 to 12 months of accumulation may lie ahead.
The divergence between exchange balances and illiquid wallets further supports the notion of steady accumulation. Illiquid supply reached an all-time high of 15.2 million BTC, while exchange balances fell to their lowest levels since January 2018 at 2.3 million BTC.
Approximately 146K BTC per month is flowing into these illiquid wallets, adding to the evidence of a gradual accumulation process.
Analyzing the balance change of different wallet size cohorts in relation to mined supply reveals meaningful increases in holdings by entities with balances under 100 BTC and shark entities (100 to 1k BTC).
However, whale entities and miners have become net distributors, releasing volumes equivalent to 70% of the mined supply.
Despite the regulatory headwinds, the market suggests an undercurrent of demand. However, this period of quiet accumulation implies that investors may face a testing period of 8 to 18 months before a new market all-time high, based on historical cycles.
As the Bitcoin halving approaches, which is now only 305 days away, past transitional periods align with halving events, occurring around two-thirds of the way through the market cycle.
Looking at prior epochs, the price performance at the halving date has varied, with the second epoch exhibiting the most significant gains.
Finally, historical data reveals that the year following each halving event has shown diminishing returns, with each epoch experiencing lower price appreciation. This effect is expected as the market matures and capital flows increase.