Liquidity across the crypto market continues to dry up, with both on-chain and off-chain volumes reaching historical lows.

These were the findings from analytics provider Glassnode in its latest weekly report on Sept. 11.

Moreover, a “significant proportion” of the BTC supply is teetering on the edge of falling into a significant unrealized loss, it added.

Liquidity across the digital asset market continues to dry up, with both on-chain and off-chain volumes reaching historical lows.

Whilst HODLing remains the market preference, a significant proportion of the supply is teetering on the edge of falling into a significant… pic.twitter.com/twInh0OqKf

— glassnode (@glassnode) September 11, 2023

More Pain For Short-Term Bitcoin Holders

In what is called a “liquidity drought,” Glassnode said that long-term BTC holders are steadfast in their holdings, “spending remarkably little of it.”

This stands to reason, as long-termers have been through bull and bear markets before and are unfazed by them. Those who entered during the last bull market may well be underwater now that the asset has retreated 63% from its peak.

It noted that realized value settled on-chain remains extremely quiet. There is minimal profit or loss being locked in by the market overall, which means most of the coins are transacting close to their original acquisition price.

“Realized Profit and Loss are similarly at levels equivalent to the 2020 market, highlighting what is arguably a complete and total wash-out of the exuberance from the 2021 bull market.”

Furthermore, the supply held by long-term holders has reached a new all-time high 14.74 million BTC. Conversely, the short-term holder supply, which is more active, has fallen to its lowest level since 2011 at 2.46 million BTC.

Regulatory concerns are still a looming shadow over the crypto industry. Until there is clarity, especially in the United States, big players and institutions may take a wait-and-see approach.

Moreover, FTX may be given the green light to start selling its crypto holdings on Sept. 13, and it has a lot of them. This could put further downside pressure on markets, which are already in retreat this week.

Messari founder Ryan Selkis said it was the worst sentiment he’s ever seen.

We’re approaching max pain. Bear markets last longer and go deeper than we want them to. Need a couple of capitulations, then chop, then rebirth.

This is near the worst sentiment that I’ve ever seen. Deeper than 2019. Closest feeling was 2015 for me.

— Ryan Selkis 🪳 (@twobitidiot) September 11, 2023

Markets Dump to Six-Month Low

Total capitalization has fallen to its lowest level since mid-March. Markets slid to $1.04 trillion during early trading in Asia on Tuesday. The last time they fell below the psychological $1 trillion level was on March 11.

A slight recovery over the past few hours has taken the total cap back to $1.06 trillion, but the bears are looking. BTC and ETH are down 0.6% and 2%, respectively, and the altcoins are in more pain.