In the history of cryptocurrency, 2022 is regarded as one of the most difficult years. Significant losses have occurred this year, pushing numerous cryptocurrencies to reach all-time lows.
The king coin, Bitcoin [BTC], was not spared, as the market’s liquidity crisis, exacerbated by the abrupt collapse of cryptocurrency exchange FTX, led it to temporarily trade at a two-year low.
Glassnode, a renowned on-chain analytics tool, examined the present health of BTC’s on-chain performance in a recent research. The study also included predictions for the next fiscal year.
Following widespread fear that led BTC’s price to fall to a two-year low in November, the leading cryptocurrency has received some respite since the beginning of December. “The Bitcoin market has gone relatively calm moving into December,” according to Glassnode, with the currency now trading at $17,144.23.
Glassnode examined BTC’s annualized realized volatility statistic and found it to be at its lowest since October 2020. This was significant because high levels in realized volatility of an asset imply a period of elevated risk in that market.
According to Glassnode, the market is largely steady since,
“Short-term realized volatility for BTC is currently at multi-year lows of 22% (1-week), and 28% (2-weeks).”
The consequences from FTX has a significant influence on BTC’s futures market. Glassnode discovered that BTC futures trading was at a multi-year low, as investors were afraid of more losses.
Glassnode believes that the BTC Futures market has a daily trade volume of $9.5 billion.
“indicated massive impact of tightening liquidity, widespread deleveraging, and the impairment of many lending and trading desks in the space.”
Another effect of the FTX collapse on the BTC Futures market was a large drop in the BTC Leverage Ratio. The BTC Futures Open Interest Leverage Ratio was 2.46% as of December 12th, according to an analysis. This was at 3.46% before to FTX’s demise.
Still on the BTC Futures market, Glassnode discovered that the futures and perpetual swaps traded at a -0.3% annualized rate. According to the on-chain platform, this was a “state of backwardation.”
“Sustained periods of backwardation are uncommon, with the only similar period being the consolidation between May and July 2021. This suggests the market is relatively ‘hedged’ for further downside risk and/or heavier with short speculators,” Glassnode reported.
Since the start of the current bear cycle in November 2021, the BTC market has managed a $213 billion in realized losses from the $455 billion in annual gains obtained by BTC investors as a result of the market’s surplus liquidity between 2020 and 2021.
According to Glassnode, BTC long-term holders (LTHs) have suffered the highest losses. This group of investors was responsible for 50% to 80% of all losses in June. LTH losses peaked at -0.10% of BTC’s market capitalization every day in November, exacerbated by FTX’s demise.
Surprisingly, despite a massive hole in their assets, these investors stayed steadfast. According to the study, after the FTX crisis, LTH increased BTC accumulation to regain the all-time high of 13.90 BTC.
