Charts can reveal a lot about crypto assets. Past performance and future indicators can be gleaned at a glance, but there's also a lot more that can be ascertained. A study of several of the most popular blockchains, including bitcoin and ethereum, has shown transaction velocity to have reached its lowest in years. Cryptocurrency is moving at a slower rate, suggesting that a crypto recession could be on the cards.
The Great Go Slow Begins
Until recently, the cryptocurrency markets were believed to be largely disassociated from the traditional world of finance. Movements in the latter had little effect on the former. But when the stock market slumped a few weeks ago, bitcoin also dipped. It could have just been a coincidence. Or, as the lines separating Wall Street and Crypto Alley become increasingly blurred, it could have been evidence of a newfound interdependence. Cryptocurrency certainly isn't immune from pronounced and protracted slumps, but the prospect of a "crypto recession" is a new one.
Transaction velocity is a metric that's commonly used to measure the rate at which money changes hands – or changes wallets in the case of cryptocurrency. High velocity means a unit of money is being frequently re-used to purchase goods and services. When people are spending, it means they're not worried about what tomorrow may bring and have no fear of recession. Cryptocurrency is more than just a form of digital cash, but transaction velocity can still be applied – and right now that velocity has slowed to a crawl.
Bitcoin Returns to 2015 Levels
As news.Bitcoin.com reported last week, on-chain transaction volume has fallen to less than half its December peak. This is believed to be a consequence of high fees making BTC too expensive to send, forcing bitcoiners to hoard the stuff rather than spend it. In addition to transaction volume being down, bitcoin velocity is at its lowest level since 2015, Coinmetrics reports. The concept of BTC as a store of value was pushed aggressively by bitcoin core supporters last year, and this is likely an attributing factor for reduced velocity. But what about other cryptos that haven't been crippled by high fees?