Bitcoin and the broader crypto market have recently begun to wake up, but underlying liquidity conditions appear surprisingly weak, according to on-chain analytics firm Glassnode, a dynamic that echoes concerns raised in a CoinDesk analysis in November about the crypto market’s empty liquidity following the October crash.
The latest data from Glassnode shows that both bitcoin spot trading volume and aggregate altcoin spot volume have plunged to their lowest readings since November 2023, even as prices have risen, a divergence that generally points to lower market participation and fragile demand beneath recent strength.
Spot volume is a metric that assesses actual buying and selling activity on exchanges, a barometer of actual trading interest.
Traditionally, healthy price increases are supported by increasing volumes, as new capital and buyers enter the market. But in this case, spot volumes have not only failed to rise along with prices, they have fallen to one-year lows, underscoring the lack of broad participation behind these moves.
Charging…
This assessment reiterates issues raised in a CoinDesk research paper published in November, which documented how liquidity on centralized exchanges, including bitcoin and ether market depth, failed to fully recover after the October liquidation cascade.
The research highlighted that post-crisis, order book depth remained structurally lower than before the sell-off, suggesting a new, thinner liquidity base that leaves markets more vulnerable to exaggerated price reactions.
The October event, which resulted in the elimination of $19 billion worth of leveraged positions in a matter of hours, did more than undo overextended bets. It reshaped the underlying structure of the market, leading to a sustained pullback in quiescent liquidity as market-making firms and liquidity providers pulled back, making markets shallower and less able to absorb large trades without a significant impact on prices.
Bitcoin is currently trading at $93,500 after rising 7.5% since January 1, but the move on minimal volume is presenting traders with a number of warning signs.
