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The significance of Bitcoin's low volatility: Insights from On-Chain Data

This edition of The Flippening covers several topics including the rapid rise and fall of the memecoin Bonk and its impact on the Solana blockchain, the increase in Ethereum staking as the Shanghai upgrade approaches, and the upward trend in DeFi Total Value Locked.

AuthorAuthor

Sabyasaachi K & Sushant Vasudevan
January 14, 2023

Hey there 👋

This week in The Flippening, TL;DR

  • Bonk token skyrockets, takes Solana with it.

  • Ethereum staking on the rise as Shanghai upgrade nears

  • DeFi TVL on an uptrend for two consecutive weeks

Top Highlights of the Week

1. Along for the ride

Bonk, the Solana-based memecoin, gained an astonishing 3000% in a week. Shortly after, it dropped 67% in four days. The memecoin's popularity had a positive impact on its parent blockchain as well. Solana gained 60% over seven days to see the best first week out of any top-20 coin, touching $16.04 recently, a territory it hadn't seen since November 2022.

Our takeaway: The crypto community enjoys a memecoin every now and then, there is no doubt about it! We've got another addition to the list of memecoins with a Shiba Inu theme. Solana's making a comeback following its unfortunate dip owing to FTX ties. And it isn't just Solana- crypto markets everywhere are beginning to turn green. Bye-bye, bear market? 

2. Last-minute investments, anyone?

Ethereum's Shanghai upgrade, which will allow withdrawals on staked Ethereum, is only weeks away. And investors are pouring in from all corners to boost their portfolios with staking tokens. Lido Finance, Rocket Pool (RPL) investors are enjoying double digit growths in the token prices.

Our takeaway: If investors hadn't seen it before, they're seeing the potential growth the Shanghai upgrade is about to bring with it now. And they're going all in, with mere weeks left for it. The upgrade is also coming at a great time, with all markets beginning to see green. Guess it's time for another round of Flippening chants. 

3. In it for the long haul

The Total Value Value Locked or TVL refers to the value of the deposits that users have locked in a blockchain project. It indicates the trust the project has been able to garner among investors. The DeFi TVL has been on an uptrend since the beginning of this year.

Our takeaway: The five biggest DeFi projects, Lido finance, MakerDAO, Aave, Curve, and Uniswap, have seen their TVL growing over the past month. It is a bullish sign for two reasons: none of these projects have made any additional incentives for participants staking their holdings. Secondly, we are yet to come out of a 'crypto winter.' 

Crypto simplified

On-chain data refers to data recorded on a blockchain and can provide important insights into the activity and health of a blockchain network and its associated digital assets. On-chain data often reveals more than what meets the eye.

Bitcoin traded within a narrow price range of $557 for over three weeks. Despite Bitcoin’s criticism for being highly volatile, it managed to trade within such a small range where the movement between the monthly low and monthly high translated to around 3.94%.

The current daily inflow volume of Bitcoin is between $350M and $400M, which is significantly lower than the levels seen during 2021-2022.

Image credits: Glassnode

It was a similar story for the largest altcoin, ETH. Ethereum’s monthly realized volatility also collapsed to 39.8%, and has also preceded extreme volatility in the past.

Why is this a significant incident?

The momentum of on-chain activity metrics is a powerful tool to monitor recovery in network fundamentals, with the 2019-20 period being a key example from the past. There is usually a rapid movement on either side after a period of low volatility.

These are the last few examples of Bitcoin’s movement post a period of low volatility.

  • In 2012-13, the early bull market, BTC prices were between $5 and $14.

  • The late bear market in 2015 and several stages through the bull run in 2016.

  • Nov 2018 immediately preceding a -50% drawdown in 1 month.

  • Apr 2019, before a rally from $4.2k to a peak of $14k in July 2019.

  • Jul-2020 in the lead-up to the 2020-21 bull run to $64k.

Disclaimer: All price movements are recorded up to 03:30 PM UTC, 14th Jan 2023

Amazing week to be in crypto

Disclaimer: All price movements are recorded up to 03:30 PM UTC, 14th Jan 2023

A good start of the year for all the sectors!

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Coin of the week 💸

Cardano: $ADA

We had a lot of good contenders this week. However, the sleeping giant had been showing some good movement lately. Even before the rest of the crypto market started moving higher, ADA moved in a tight range. Such consolidations usually pave the way for a higher upside.

Featured: Mudrex Coin Set 😎

Just a couple of weeks into the new year, and we're already seeing promising signs of the bear run ending. Markets are beginning to turn green, and it might be a great time to revisit your crypto portfolio. While you're at it, don't forget to diversify.

Owing to some big movements in the market and evergreen fundamentals, crypto blue chips are about to rake in some big money.

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If you liked this edition, feel free to share it with your friends and other crypto curious folks.