BTC Could Have a Fruitful 2023 Thanks to LTHs and The Exit of These Market Players

2022 was a tumultuous year for cryptocurrency, marked by significant losses and market instability. Bitcoin [BTC], the leading cryptocurrency, faced its challenges, hitting two-year lows amidst liquidity crises and the collapse of FTX. But what does 2023 hold? Could Bitcoin see a resurgence? Let’s delve into a recent analysis by Glassnode, a renowned on-chain analytics platform, to understand the current health of Bitcoin’s on-chain performance and potential predictions for the coming year.

Bitcoin’s Calm December: A Sign of Recovery?

Following a period of intense fear that drove Bitcoin’s price to a two-year low in November, December has brought a relative calm. According to Glassnode, Bitcoin has entered a period of stability, currently trading around $17,144.23. But is this calm before another storm, or a genuine sign of recovery?

One key indicator is Bitcoin’s annualized realized volatility. Glassnode’s analysis reveals that it’s at its lowest since October 2020. Here’s why this matters:

• Lower Volatility: Indicates reduced risk in the Bitcoin market.
• Increased Stability: Suggests a more predictable trading environment.
• Potential for Growth: Calmer markets can attract more conservative investors.

Glassnode further notes that short-term realized volatility is at multi-year lows, with 1-week volatility at 22% and 2-week volatility at 28%.

The Lingering Impact of FTX on Bitcoin’s Futures Market

The collapse of FTX has had a significant impact on Bitcoin’s futures market. Investor confidence has been shaken, leading to multi-year lows in BTC futures trading. The daily trade volume in the BTC Futures market is now around $9.5 billion, reflecting the impact of tightening liquidity and widespread deleveraging.

Another consequence is a substantial drop in the BTC Leverage Ratio. Before FTX’s collapse, the BTC Futures Open Interest Leverage Ratio was 3.46%. As of December 12th, it has fallen to 2.46%.

Furthermore, futures and perpetual swaps are trading at a -0.3% annualized rate, a condition known as “backwardation.” Glassnode suggests this indicates the market is heavily hedged for further downside risk or populated with short speculators.

Long-Term Holders: The Unwavering Believers

Since the start of the bear market in November 2021, the Bitcoin market has seen $213 billion in realized losses, set against the $455 billion in annual gains from the surplus liquidity between 2020 and 2021. Long-term holders (LTHs) have borne the brunt of these losses, accounting for 50% to 80% of all losses in June. Their losses peaked in November, exacerbated by the FTX collapse, reaching -0.10% of Bitcoin’s market capitalization daily.

However, despite these losses, LTHs have remained steadfast. Post-FTX crisis, they increased their Bitcoin accumulation, reaching an all-time high of 13.90 BTC held. This unwavering commitment suggests a strong belief in Bitcoin’s long-term potential.

Key Takeaways and Future Outlook

• Market Stability: Bitcoin shows signs of stabilization with reduced volatility.
• Futures Market Impact: FTX collapse continues to affect futures trading and leverage ratios.
• LTH Resilience: Long-term holders remain committed, increasing their Bitcoin holdings.

While challenges remain, the resilience of long-term holders and signs of market stabilization offer a glimmer of hope for Bitcoin in 2023. Keep a close eye on volatility, futures market trends, and the behavior of long-term holders to gain deeper insights into Bitcoin’s potential trajectory.