The bitcoin price, up around 30% since the beginning of the year, has traded sideways over the last two months— and a bitcoin trading volume slump has caused some cryptocurrency analysts to fear a return to the bleak so-called “crypto winter” of late 2018.
Trading volumes on the world’s biggest bitcoin exchanges dropped “drastically” by 36% in June, according to a report this week from London-based data provider CryptoCompare.
“Spot volumes have gradually dwindled throughout the month of June, now representing roughly half of the daily volumes seen in the previous month,” the report authors wrote, adding “crypto derivatives exchanges experienced a 35.7% drop in volume,” taking them to “the lowest monthly volumes since the start of 2020.”’
“People are hunkering down and ‘hodling’ [an industry term for holding onto crypto assets],” CryptoCompare’s chief executive Charles Hayter said via email.
“Frictions between fiat and crypto are decreasing and you have a form of Gresham’s Law where the asset that cannot be diluted becomes the haven of choice. This can be seen in the data and in the amount of products appearing globally allowing traditional market money exposure to this asset class through exchange-traded products.”
Earlier this month, London-based investment group ETC announced it plans to list a bitcoin-backed exchange-traded product called the Bitcoin Exchange Traded Crypto on Deutsche Borse’s Xetra—the latest in a slew of bitcoin investment products coming to market recently.
Despite an increase in the availability of bitcoin-based financial products, some bitcoin and crypto analysts are concerned.
“Bitcoin’s sideways price trend has already gone on for too long,” FxPro financial analyst Alex Kuptsikevich said via email, pointing to bitcoin’s “multiple failures” to convincingly breach $10,000 per bitcoin.
“The situation is now reminiscent of the months before November 2018, when an extended period of feeble dynamics turned into a collapse to the lowest level seen during the crypto winter.”
Kuptsikevich warned bitcoin’s correlation with the U.S. S&P 500, found to over 65% according to recent analysis by crypto derivatives research firm Skew, “doesn’t indicate a positive outlook” due to the market’s apparent disconnect with the post-coronavirus economic reality.
“Institutions now provide the bulk of liquidity for the crypto market, so neither halving nor other internal crypto factors have had as much impact as the traditional financial market can have,” Kuptsikevich said.
“Retail investors either lost interest in bitcoin after the 2018 collapse or simply have no money to invest due to job or savings losses during the epidemic.”
Others are more upbeat, however, with one analyst suggesting bitcoin investors should welcome bitcoin’s recent low volatility.
“[A drop in bitcoin trading volume] could be a sign of volatility to come but also it might not be,” Mati Greenspan, the founder of market analysis firm Quantum Economics, said via email.
“The bitcoin network has been seeing increased usage lately and it’s good to see the price consolidating a bit. A bit of boring price action is actually really healthy.”