A significant shift is occurring in the cryptocurrency market, with on-chain Bitcoin volume exceeding that on centralized exchanges, possibly indicating liquidity issues.
Understanding the Shift in Bitcoin On-Chain Volume
On-chain volume reflects the total sum of transactions recorded directly on the Bitcoin blockchain, differing from the off-chain transactions managed by centralized exchanges. The growing on-chain activity indicates changes in how Bitcoin holders are moving and storing their assets.
What Does a Bearish Divergence Tell Us?
Recently, a bearish divergence has been observed, where Bitcoin prices continue to rise, but trading volume on centralized exchanges is declining. This may suggest reduced trader activity at higher price levels, rendering the market more susceptible to volatility.
Navigating the Market’s Liquidity Shortage
A liquidity shortage leads to challenges in trading, with wider bid-ask spreads and increased price volatility. Contributing factors may include heightened self-custody, institutional accumulation, and regulatory uncertainties.
The increasing on-chain Bitcoin volume signals significant market changes, necessitating careful analysis and a cautious approach to investments.
