Stabilizing Bitcoin: Decreased Volatility and Looming Catalyst on the Horizon

Bitcoin’s Price Consolidation

The price of Bitcoin (BTC) has been experiencing a period of consolidation, trading within a tight range. At the time of writing, the price stands at $26,237. This consolidation has resulted in a minimal 3.4% price range, leading some analysts to believe that BTC price is stagnant. However, there are expectations of a potential increase in volatility. Despite this lack of price action, Bitcoin has still outperformed many other assets in 2023.

On-Chain Data and Bitcoin Price

A recent report from Glassnode highlights the importance of on-chain data in understanding Bitcoin’s price.

Unrealized Profits and Volume Trends

In terms of realized liquidity, Bitcoin price remains relatively low. This is likely because many investors are currently breaking even around the current Bitcoin price. Approximately 9% of unrealized profits are still in the market, reflecting historical oversold levels.

Although there has been an increase in transactions due to text-based ordinals, Bitcoin volume remains muted. The lack of liquidity amplifies the accumulation strategy among Bitcoin investors, even in the presence of unrealized profits. On-chain transfer volumes for Bitcoin are currently below $4 billion, significantly lower than the all-time high of over $13 billion.

Due to minimal unrealized profits and low liquidity, there is limited incentive for hodlers to sell their Bitcoin holdings.

Accumulation Strategies and Wealth Expansion

Following the significant drop in Bitcoin prices in May 2021 (from $56,000 to $29,000), many traders began accumulating BTC. Although these buyers are currently experiencing losses in terms of profit, their overall wealth has continued to expand compared to other groups.

The wealth of the May 2021 accumulation group has increased by 25% compared to other groups. Conversely, hodlers from six months to two years are currently at a loss.

Hodlers who have experienced multiple Bitcoin cycles, particularly those from the 2021 cycle, have exhibited strong conviction and resilience. This has allowed them to increase their wealth ratio as weaker hands exit the market.

Bitcoin vs. Banks

Analysts are expressing concerns about the potential impact of a U.S. debt default on Bitcoin’s price. Despite typically mirroring the macro markets, BTC has performed better than equities since the U.S. regional bank run.