For the past nine weeks, cryptocurrency markets have been relatively quiet. According to on-chain analysis, such periods of low volatility usually precede a large move.
Glassnode, an on-chain analytics provider, stated in a Jan. 9 report that markets began the year sleeping. Since the FTX collapse in early November, they have actually remained tightly range bound.
Bitcoin and Ethereum have recently experienced historically low volatility, which could be a sign of bigger things to come.
“Such periods have historically preceded explosive market moves, with past examples both cutting asset valuations in half, and triggering new bull markets.”
For more than three weeks, Bitcoin traded within a $557 price range. It finally surpassed $17,000 on Jan. 9, but it appears to be in a consolidation phase.
The last two occasions when realized volatility was so low were in November 2018 and April 2019. The first was followed by a massive market drop, and the second by a massive pump.
With the exception of November 2018, all previous examples “preceded much higher volatility environments on the horizon, with most trading higher,” it added.
For several months, on-chain activity, such as new and active BTC addresses, has also been stagnant. According to Glassnode, the total USD value processed by the Bitcoin network has been in freefall.
The decline in large transactions “suggests a significant lull in institutional sized capital flows, and possibly a serious shaking of confidence amongst this cohort.”
Furthermore, ETH has had even fewer historically quiet periods. A quiet period in July 2020 was followed by the start of the 2020/21 bull market.
Ethereum gas prices have been near cycle lows, indicating that demand for block space has decreased. According to the report, this has occurred in a variety of industries.
“Several domains’ relative gas consumption dominance is declining: MEV bots, Bridges, DeFi protocols, and ERC-20 tokens.”
Furthermore, 2022 was the first year that BTC and ETH closed lower than previous cycle highs.
Glassnode concluded that the 2022-23 holiday season has been historically quiet, “and it is rare for such conditions to persist for an extended period of time.”
Monday’s explosive start to the week has already peaked. As a result, markets have remained relatively stable over the last 24 hours, with total capitalization remaining at $885 billion.
According to CoinGecko, the drawdown from peak capitalization levels is still at 71.3%.
If history repeats itself, a relief rally could occur within the next month or two, but the bears are likely to remain until the latter half of 2023.