As global markets wobble, Bitcoin faces sharper drops, notable ETF outflows, and cooling activity. However, miners remain committed, driving the network's competitiveness forward.
Amid the global stock market slide and the mounting concerns about a possible U.S. economic slowdown, the Bitcoin market is interesting to observe. This new type of asset, often praised for its portfolio diversification potential, is generally uncorrelated with traditional markets, sometimes reacting to broader macroeconomic events, and other times following its own logic.
Last Tuesday’s stock market slump was mirrored by the BTC price, but with a bigger amplitude. While the S&P500 dropped 3.7%, Nasdaq100 5%, BTC plunged 12%. Since then, all have recovered about half of their losses.
Bitcoin’s sharper decline could be attributed to its lower market depth and liquidity, or else by its relative immaturity compared to the stock market. However, there may also be factors related to the Bitcoin blockchain and its use, which has been rather sluggish lately.
Institutional investors are showing signs of unease too, with outflows from Bitcoin spot ETFs reaching $643 million last week and matching the largest recorded outflow set in March this year (data: Coinshares).
Is it a temporary slowdown to address the overall macro fears, or does this situation signal a deeper trend? Bitcoin miners seem to have an answer to this, as their industry gets ever more competitive despite the languishing revenues.
Bitcoin activity cooling off
The recent Coinglass report sheds light on some of the most important characteristics reflecting the state of Bitcoin – the transfer activity. For Bitcoin to fulfill its ambition as an alternative currency, it must not only serve as a reliable store of value (quality ensured by its scarcity and independence), but also a practical means of exchange. In other words, BTC price increase must be accompanied by increased real-world adoption, i.e. people using bitcoin as money.
The Glassnode chart shows that after a strong spring, bitcoin settlement volume is beginning to fall towards its yearly average. The network is currently processing and settling around $6.2 billion worth of transactions per day, marking a cooling off from the previously recorded high of $10 billion.
Trading appetites are decreasing too, with monthly average exchange volume falling well below the yearly and marking a weak momentum. Another useful metric to assess Bitcoin activity is network value to transactions (NVT), and its signaling indicator called “NVT Golden Cross.” This metric compares short- and long-term trends in NVT and predicts local tops and bottoms (values over ‘2.2’ : short signal, values under ‘-1.6’ : long signal).
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