• The state of bitcoin’s volume and volatility has been in decline since September and November 2021, with peak months of action.
• Liquidity has been hit hard with the collapse of FTX and Alameda, leading to a large decrease in market depth and liquidity.
• The bitcoin price is providing pain as we have yet to see the type of explosion in market volatility that has defined market pivots and major directional moves in the past.

Bitcoin has been in a state of decline since the peak action months of September and November 2021. Volume and volatility have both been decreasing steadily across spot and perpetual futures markets, with liquidity taking a major hit after the collapse of FTX and Alameda. This has led to a large decrease in market depth and liquidity, and has meant that the bitcoin price has yet to see the type of explosion in market volatility that has defined market pivots and major directional moves in the past.

The low volume and low volatility period in bitcoin price, GBTC and the options market was an indication of a potential leg lower in October, which did play out in early November. While this could be indicative of another leg lower to come in the market, it’s more likely indicative of a complacent and decimated market that few participants want to touch. Even during the November 2021 capitulation period, there was a historically low period of volatility.

As investors head into 2023, they are faced with the challenge of waiting for a clear change in trends. In the meantime, they must confront the pain of a lack of market activity, and hope that the bitcoin price can soon experience an explosion in market volatility that has defined market pivots and major directional moves in the past.