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

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