Amid a state of economic uncertainty globally, Bitcoin (BTC) exchanges have witnessed a significant drop in trading volumes.
This decline has extended over the past few months, with daily Bitcoin trading volumes reaching levels not seen since 2018. Additionally, we’ve observed that over-the-counter Bitcoin exchange transactions have fluctuated between $8,000 and $15,000 in the past week, a stark contrast to the average daily price of Bitcoin.
This decrease in volume coincides with Bitcoin’s price movement staying within the range of $25,000 to $26,000 for several months.
I believe the drop in trading volumes is due to the global economic instability. However, actions taken by the US Federal Reserve have heightened concerns and a persistent sense of market uncertainty, leading investors to anticipate a potential economic downturn.
The unclear stance of the Federal Reserve regarding interest rate hikes and temporary pauses throughout 2023 has contributed to this sentiment.
Despite the drop in trading volumes, it appears that Bitcoin holders are holding onto their current investments. They are not seeking quick profits through short-term trading but view Bitcoin and other cryptocurrencies as long-term investments. These investors are more interested in holding onto their crypto assets, believing in their future value rather than selling at the first sign of potential profit.
Recent data from the cryptocurrency analytics platform “IntoTheBlock” indicates that long-term Bitcoin holders continue to hold their assets despite market disruptions. Long-term holders are investors and companies that purchased their cryptocurrencies at least a year ago. They currently hold 13.44 million Bitcoin, representing 69% of the circulating supply in the crypto Bitcoin market.
From my perspective, the drop in trading volumes and the shift towards long-term holding come at a time when Bitcoin’s price is stabilizing around $26,000. Short-term Bitcoin holders are currently holding onto their funds, incurring unrealized losses as the cost basis rises above the current spot price of Bitcoin.
As a result of these factors, interest in Bitcoin as a short- and medium-term investment has waned, evident in recent drops in US stock indices, particularly the Nasdaq and the S&P 500. Interest in owning and investing in Bitcoin among new investors remains low amidst the current economic uncertainty and globally unstable market and economic conditions.
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