The past year has no doubt been tumultuous for the crypto sector. Since tapping an all-time high, Bitcoin has lost over 70% of its value, 64% of which was depleted in 2022 alone. This has coincided with a severe drop in the top crypto’s realized market cap, which has declined by -18.8% since ATH, representing a net capital outflow of -$88.4B from the network.

Ethereum faced a similar fate, albeit it Realized Cap falling by an even larger relative scale of -29.2% since the ATH. Smaller cryptocurrencies were hit the hardest, with assets such as Solana, Shiba Inu and Dogecoin losing over 80% of their value.

The severe drop in crypto prices coincided with a battalion of events. Apart from harsh anti-inflation policies by the US Federal Reserve, the collapse of FTX and its sister trading firm Alameda Research deteriorated things further, forcing investors to take a safety flight.

Markets are Still in Slumber

According to a report by on-chain analytics platform Glassnode, despite cryptocurrencies being infamous for their volatility, the holiday break was exceptionally quiet, with Bitcoin’s realized volatility over the last month declining to multiyear lows of 24.6% “of which there are very few instances with similar levels.”

The market continued to experience quiet on-chain activity, with exchange-dominated inflows for BTC dropping below $500M/day, a far cry from the multi-billion-dollar levels seen throughout 2021-22. Ethereum’s light on-chain utilization also persisted into 2023, with the average gas price paid on the Ethereum chain remaining near cycle lows.

As per the report, the mean gas price since September has ranged between 16 and 23 Gwei; levels last seen during the June-July 2021 consolidation, and in May 2020, shortly after the pandemic market panic. Notably, the four leading sectors for Ethereum, MEV bots, Bridges, DeFi protocols, and ERC-20 tokens, now account for only 22.6% of network gas consumption, down from 45.5% between Sept-2020 and Sept-2021.

Calm Before the Storm

Glassnode contends that big price moves are around the corner despite the crypto market gloom. The firm argues that it is rare for such conditions to stick around for long, pointing to the post-November 2018 and April 2019 explosive moves that preceded extremely low realized volatility.

“Such periods have historically preceded explosive market moves, with past examples both cutting asset valuations in half, and triggering new bull markets,” wrote Glassnode.

In Nov 2018, BTC dropped -50% in 1 month, immediately after a long consolidation, while in April 2019, the top crypto rallied from $4.2k to a peak of $14k in July 2019. That said, whereas it is too early to infer price directions, pundits have pointed out that the market bottom is in for BTC, a clear reminder that it is time to be on the lookout for any major direction shifters.