Analysts at Glassnode said that Bitcoin (CRYPTO: BTC) “remains firmly within bear market territory” based on supply dynamics and on-chain activity.
What Happened: In the latest edition of its weekly newsletter examining the crypto market, Glassnode warned that a period of higher volatility could be around the corner.
“At the moment, we have implied volatility climbing, and leverage ratios in futures markets approaching overheated levels, particularly across perpetual futures,” read the report.
“Market structure such as this has preceded periods of very high volatility, as was seen in May 2021, and Aug 2021, and thus suggests a regime of higher volatility may be around the corner.”
The analysts noted that open interest in Bitcoin futures has been on a steady ascent, currently reaching 1.94% of the BTC market cap. Historically, leverage ratios that exceeded 2% of market cap have been high-risk periods followed by violent deleveraging.
Metrics such as active addresses, new on-chain entities, and transaction counts are in a similar zone to the 2019-2020 bear market recovery, observed the analysts. However, unlike the previous bear cycle which saw low levels of transaction volume, the total daily settlement value continues to trend higher.
“On-chain activity and supply dynamics remain firmly in the bear market territory in magnitude and trend, but are somewhat directionless in their forward bias,” concluded the analysts.
“Should evidence of strength appear in the form of accelerating on-chain activity, and increased supply migrating into long-term holder hands it would favoUr the bulls, especially given volatility expectations. Similarly, deterioration would favor the bears.”
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