Delphi Digital 13 charts that explain why cryptocurrency prices are currently struggling to make significant breakthroughs.

Delphi Digital's 13 Charts Illuminating the Reasons Behind Struggling Cryptocurrency Prices

Author: Michael Rinko, Delphi Digital; Translator: LianGuaioxjs

Why is it currently difficult for cryptocurrency prices to break through significantly?

One reason is low liquidity, ignoring narrative catalysts. Let’s understand it with 13 pictures:

1. BTC’s 1% market depth is at the lowest point of the year.

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2. Both CEX and DEX trading volumes are poor.

3. Stablecoins are experiencing the most severe outflows ever.

4. The fundamental reason for capital continuing to flow out instead of into the crypto market is interest rates.

Why borrow on Aave when you can earn more by lending money to the US government?

5. High interest rates result in historically low levels of on-chain activity.

6. The financing environment is equally harsh, as venture capital firms have shifted their investment from crypto tokens to AI like chatGPT.

7. The current brutal PvP (player versus player) market reflects these challenging liquidity conditions. When new tokens are launched, everything is zero-sum, no longer seen as “rising due to innovation” as during DeFi summer, but as another mouth to feed.

8. Thinking about the interaction between tokens, liquidity, and prices from the perspective of supply and demand is an oversimplified but not entirely wrong way, expressed by the following formula: Liquidity/Token = Future returns.

9. During the DeFi Summer, tokens were scarce and many were named after various foods like Sushi. However, liquidity also decreased significantly. ETH’s TVL (Total Value Locked) skyrocketed to $7 billion in just 3 months. The demand for liquidity won, causing prices of almost everything, including “food coins,” to rise.

10. The current market situation is different. New tokens are forced to compete in PvP (Player vs Player) as they fight for market share and liquidity among around 100,000 cryptocurrencies.

11. We can imagine this dynamic in the rising trend of liquidity where popular narratives roughly align in their trades.

But in bear market cycles, narratives compete for limited capital, resulting in different price behaviors as capital rotation forms a zero-sum game.

12. Even in rare cases of symbiotic narratives, PvP dynamics still dominate the market.

We see this happen, and one would think Bald and friend tech would benefit each other as they bring in new users and on-chain capital. However, the reality is that this relationship ultimately attracts more parasites.

13. To restore the cycle of price increase -> user influx -> price increase, we need improvement in the liquidity environment.

Small price increases of crypto tokens are indeed possible, butbreaking through significantly depends on the retaliatory return of cheap capital.

14. Valhalla (the Norse mythological main god) is destined and coming, but it may only come after some market turbulence.

Faithful believers will undergo the final trial by fire before the arrival of eternal glory.

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