Research Summary

The report discusses the ongoing liquidity drought in the digital asset market, with both on-chain and off-chain volumes reaching historical lows. It highlights the decline in stablecoin supply, the stagnation of capital inflows into major assets like Bitcoin and Ethereum, and the prevailing market sentiment of extreme apathy. The report also notes the steadfastness of Long-Term Holders and the precarious position of Short-Term Holders in the current market conditions.

Key Takeaways

Decline in Stablecoin Supply

  • Stablecoin supply reduction: The report notes a persistent decline in the supply of stablecoins since April 2022, with a total of $43B in capital redeemed, representing a 26% decline since March 2022.
  • Uneven dynamics among stablecoins: While Tether (USDT) supplies have expanded, USDC and BUSD have seen significant declines, with BUSD experiencing a dramatic 89% drop due to Paxos moving into redemption-only mode.
  • Tether’s market dominance: Tether now represents 69% of the stablecoin market, a significant increase from its 44% low in June 2022.

Market Apathy and Uncertainty

  • Neutral market conditions: The report describes the current market conditions as neutral, with the market becoming increasingly apathetic and uncertain.
  • Low liquidity and volatility: The digital asset market is experiencing low liquidity and volatility, with Bitcoin network settlement volumes returning to October 2020 levels.
  • Low on-chain and off-chain activity: Both on-chain and off-chain domains are exceptionally quiet, with futures trading volumes hitting historical lows.

HODLing as the Primary Market Dynamic

  • Long-Term Holders holding steady: The supply held by the Long-Term Holder cohort has reached a new all-time high, indicating their steadfastness in holding their assets.
  • Short-Term Holders in a precarious position: The supply held by Short-Term Holders has fallen to the lowest level since 2011, with a large majority of their supply acquired above the current price range.
  • Increasing investor holding time: The report notes an increasing trend in investor holding time, indicating a reluctance among investors to part with their held coins.

Actionable Insights

  • Monitor the stablecoin market: Given the significant changes in the stablecoin market, it would be prudent to keep a close eye on the dynamics of different stablecoins.
  • Prepare for potential volatility: The current low volatility environment could be a precursor to heightened volatility in the future. Investors should be prepared for potential market swings.
  • Consider the implications of HODLing: The steadfastness of Long-Term Holders and the precarious position of Short-Term Holders could have significant implications for the market. Understanding these dynamics could provide valuable insights for investment strategies.

Visit the full report here

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