Bitcoin trading volume and liquidity have fallen to their lowest levels since 2019, pushing the market into a clear stagnation phase.

CoinPost, a blockchain media outlet, reported on Aug. 18 that Bitfinex assessed in a report combining on-chain data and macroeconomic indicators that the bitcoin market has effectively entered an “indifference phase.”

Bitfinex said that after converting exchange spot trading volume into bitcoin terms, the indicator fell to its lowest level since 2019. It said aggregated data across all exchanges may partly reflect the impact of Binance’s fee-free policy introduced in 2022, but even looking at Binance alone, volume fell to a level similar to the 2023 bear market.

A “turnover” indicator showing how actively bitcoin moves also hit its lowest in 7 years. Bitfinex said existing holders are barely moving assets and new transactions are not active. It viewed this as a signal that overall market interest has cooled sharply.

Bitcoin is failing to find a clear direction within a narrow range. Bitfinex presented $52,699, the realized price reflecting the average cost basis of all market participants, as a lower support line and $67,176, the realized price for short-term holders, as an upper resistance line. It said around $63,200 has acted as support over the past 2 weeks, but if that level breaks, the price could fall further to around $57,803.

Bitfinex cited differences in how assets respond to interest rate expectations as a backdrop to bitcoin’s stagnation while stock markets set new highs. It said expectations of U.S. Federal Reserve rate cuts were quickly reflected in stock markets that are sensitive to the value of future cash flows, but bitcoin did not receive benefits of the same scale.

Macroeconomic conditions are also failing to provide a clear direction for bitcoin. The July consumer price index showed broad stability due to falling energy prices, but core inflation was 2.5 percent, above the Fed’s 2 percent target. Services prices also rose 3.0 percent year on year, leaving the Fed needing to further check employment and inflation indicators going forward.

Despite slowing inflation, real average wages fell 0.2 percent from a year earlier and household sentiment weakened. If consumers’ spending capacity shrinks, it could also constrain funds that might flow into risk assets including bitcoin.

Bitfinex noted that it has been rare for a state of sharply contracted volume and liquidity to persist for a long period. It said there were past cases in which price volatility expanded rapidly after markets became extremely quiet like this, adding that what will determine the next direction is whether actual funds flow into the market rather than rate-cut expectations themselves.

For bitcoin to regain an upward trend, net inflows into spot bitcoin exchange-traded funds and an expansion in stablecoin supply need to appear together. It said that in the current environment of contracted trading, a strong rebound could be limited unless market liquidity revives.

Key events to gauge future liquidity flows include remarks by the Fed chair at the Jackson Hole meeting in late August and minutes from the Federal Open Market Committee meeting. For the time being, the report said that in the bitcoin market, whether volume recovers and actual inflows emerge, rather than price moves themselves, is likely to be a key indicator for judging direction.