Economic Uncertainty Triggers Sharp Decline in Bitcoin Trading Volumes
Summary:
Amid ongoing economic instability, Bitcoin (BTC) trading volumes have noticeably declined to levels scarcely seen since 2018, reports blockchain analytics firm CryptoQuant. The firm links the reduced daily BTC transactions to macroeconomic uncertainty and actions by the US Central Bank. As a response, more investors view Bitcoin as a long-term investment rather than chasing short-term profits. However, the volatile environment has resulted in unrealized losses for short-term holders and the emergence of "strong resistance" due to the cost basis of new market entrants.
Economic instability has led to a significant decline in Bitcoin (BTC) trading, with volumes plummeting to levels not seen since 2018, according to recent blockchain data analysis by CryptoQuant. The report found that daily BTC transactions have been considerably reduced amid ongoing economic uncertainty.
Bitcoin's price stability over the past few months appears to be dampening enthusiasm for transactions. Data from CryptoQuant, which covers both direct and derivatives trading, demonstrates how much volumes have shrunk since BTC/USD hit its current plateau in March. Between 8,000 and 15,000 daily spot exchange transactions were recorded last week, a mere fraction of the standard daily count in March, which exceeded 600,000.
Chief contributing analyst Caue Oliveira links this decline to macroeconomic factors, noting fears over the current economic situation. Oliveira identifies actions by the US Central Bank as causing ongoing uncertainty, leading investors to anticipate a possible recession.
Oliveira draws attention to ongoing fiscal policy in the US, where the Federal Reserve's oscillation between interest rate increases and pauses in 2023 maintains a tight economic environment. In response, Oliveira notes, Bitcoin investors prefer to keep hold of their BTC capital.
According to Oliveira, more people view Bitcoin and other cryptocurrencies as long-term assets. "Rather than chasing rapid gains through short-term trading, an increasing number of people view Bitcoin and other cryptocurrencies as long-term investments," he stated. "They prefer holding their coins with a belief in their future value rather than selling at the earliest opportunity for profit."
However, the recent environment has proved challenging for Bitcoin speculators. Short-term holder entities, those who hold BTC for up to 155 days, currently possess almost all their funds at a loss, with cost basis exceeding current spot prices.
Further research this week by fellow CryptoQuant contributor Yonsei_dent suggested that the cost basis of various Bitcoin novices would serve as "strong resistance". He cautioned, "Excluding long-term hodlers and those who have been in the market for over a year, it is believed that new entrants have a stronger inclination to buy and sell in the short term".
Serious interest in Bitcoin exposure remains significantly low. Google Trends data reveals the lowest search interest in "Bitcoin" since October 2020.
This report does not offer investment guidance or recommendations. Every investment and trading move carries risk, and readers should carry out their own research before making any decisions.
Published At
9/26/2023 11:20:00 AM
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