The state of crypto – September 2023 The state of crypto – September 2023 The state of crypto – September 2023

The state of crypto – September 2023

Mads Eberhardt

Cryptocurrency Analyst

Summary:  The crypto market shows little sign of life, as the spot volume is at a 4.5-year low amid non-existing volatility. There is a limited flow of new capital into crypto during the absence of retail and traditional investors, leaving the market to hard-core crypto enthusiasts who are still accumulating. The best answer for the crypto market to revive itself in the near term is a Bitcoin ETF.


Immediately upon interacting with a blockchain, much data becomes publicly available on a public ledger. Analyzing this data may provide crypto traders and investors with helpful insight into the present state of the market. In “The state of crypto”, we take a look at the most important metrics to observe the market based on transaction and trading activity. Our main focus is the two largest cryptocurrencies Bitcoin and Ethereum, and we divide the metrics into short-term and long-term indicators. You find the report for the last month here.

Short-term

The crypto market continues to show absolutely zero sign of life, similar to the past couple of months. The spot volume is at a 4.5-year low, fueled by non-existing volatility. It appears that no new capital flows into crypto, especially from retail investors amid macro uncertainty and high-interest rates, so the crypto market is now only cared about by die-hard crypto enthusiasts. The positive aspect, though, is that it appears that these die-hard crypto enthusiasts accumulate crypto, including Bitcoin and Ethereum, as the percentage of these cryptocurrencies on exchanges remains on a downward trajectory month-over-month. This implies that less Bitcoin and Ethereum are available to be sold on short notice by having been transferred off exchanges.

The absence of new capital and speculative retail means that the needle in terms of price is not as easily moved, even as positive news breaks. This was evident as late as last week when the largest crypto asset manager Grayscale won a lawsuit against the Securities and Exchange Commission, effectively forcing the agency to review Grayscale’s application to turn its Bitcoin trust into an ETF. This court ruling barely moved crypto prices, although the ruling is greatly positive for the market, highlighting the present exhausted nature of crypto.

Exchange Balance in Percent. During times when crypto investors are more inclined to sell crypto, they often store their cryptocurrencies directly on an exchange to prepare to sell their holdings. On the contrary, they often move the funds to private wallets when they are less likely to liquidate them. In other words, low exchange balances on exchanges are often perceived as valuable for a potential upward trajectory. Source: Santiment
Exchange Inflow. This metric solely concerns the total deposit of Bitcoin and Ether to exchanges without considering the withdrawal of funds. By only considering deposits, we may better interpret what leads to sell pressure. Source: Santiment
Dormant Circulation. Shows how many Bitcoins and Ether were moved after not being moved for at least 365 days prior to that – accumulated on a daily basis. A high number may express eagerness from long-term holders to liquidate their portfolios. Source: Santiment
Supply Distribution for BTC. This illustrates the supply distribution in percent of Bitcoin and Ethereum based on the amount addresses hold. This may indicate which groups are buying or selling, for instance, whether whales are selling or buying. Source: Santiment
Supply Distribution for ETH. Source: Santiment
Price Volatility 1W. Source: Santiment

Long-term

The price declines of August have put the average holder of the past 5 years of Bitcoin and Ethereum in negative territory, compared to a positive territory last month. The average loss on both Bitcoin and Ethereum may lead some die-hard crypto enthusiasts to lose faith in crypto and liquidate positions, particularly if the overall macro environment worsens further.

In July, there was a substantial inflow to exchange-traded crypto products such as ETPs, mutual funds, and OTC trusts of nearly $250mn. This inflow was completely erased in August by the total outflow of around $277mn, mostly with respect to Bitcoin products. This stresses that traditional investors cut down on crypto exposure in August, alongside most notably tumbling technology stocks. This supports our view that crypto is almost exclusively left with die-hard enthusiasts. To turn this trend around for good, a Bitcoin ETF is without doubt the answer.

Circulating Supply (5 years). For Bitcoin and Ethereum, there are continuously issued new Bitcoins and Ether to the supply, respectively. However, it may be the case that someone is permanently unable to access their wallet, which means the supply technically is lower. By looking at Bitcoin’s and Ethereum’s supply that has moved in the past 5 years, we might better interpret the authentic supply and whether large inactive wallets suddenly turn active. Source: Santiment
Market Value to Realized Value (MVRV) Ratio (5 years). The market value to realized value ratio (MVRV) calculates the average profit or loss of all holders based on when each token last moved over the past 5 years. For example, if the MVRV ratio is 1.5, holders are on average estimated to be up by 50%. Source: Santiment
Inflow and Outflow in ETPs, mutual funds, and OTC trusts. CoinShares publishes a weekly report on inflow or outflow into crypto ETPs, mutual funds, and OTC trusts. Since these products are particularly popular among more traditional investors, an inflow or outflow may describe the sentiment among this group of crypto investors.
Source: Saxo Group
Source: Saxo Group

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
- Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.