The malaise surrounding Bitcoin runs far deeper than its price.
The world's largest cryptocurrency has been languishing around $47,000, well below early November's highs of nearly $69,000. A look under the hood helps explain why: Trading volumes have dried up, futures open interest is plunging and the number of active addresses has stalled out.
Taken together, the data paint a picture of diminished animal spirits after Bitcoin peaked following the fall launch of the first US futures-tracking exchange-traded funds. Dip buyers - a once-reliable fixture in cryptocurrency markets - have yet to meaningfully reemerge even after a 33% drawdown. Meanwhile, after billions of dollars worth of leveraged positions were flushed out in last month's flash crash, new investors have yet to fill the void.
"There was a lot of leverage in the system in May and then in the lead-up to November," said Jim Greco, a managing director at Radkl, a crypto-trading firm. "There could be a lot of people who got washed out and they need to be replaced by new capital."
Trading activity in Bitcoin has trailed off as enthusiasm has ebbed. After trending lower for months, volume across exchanges clocked in at a mere $4.8 billion on Tuesday, data from Kaiko compiled by Messari show. That's down from $13.1 billion a year earlier, and is well below the one-year average of roughly $9.2 billion.
Volume hasn't broken above $10 billion since December 4, when the price of Bitcoin plunged more than 20% in a matter of minutes in a display of the coin's notorious weekend volatility. About $2.4 billion of crypto exposure, both long and short, was liquidated during the drop, according to data from Coinglass.com.
"We saw a number of US funds, prop shops and hedge funds put risk back on basically into the last hours of the year, but this year what we've seen is volumes are relatively down as opposed to the beginning of last month," said Aya Kantorovich, head of institutional coverage at FalconX. "I think what we're seeing is still this question around, 'Are we still risk-off or risk-on?'"
The futures market tells a similar story. After spiking to an all-time high of $17.4 billion in late October, open interest on Bitcoin futures contracts on the Chicago Mercantile Exchange is now about $10.6 billion - a 39% drop.
Fueling the run-up was the anticipation of the first US Bitcoin futures ETF, which debuted in mid-October as one of the most-traded funds on record. However, enthusiasm quickly waned - after attracting more than $1 billion in just two days, assets under management in the ProShares Bitcoin Strategy ETF stand at $1.2 billion.