Since 2021, major market cap tokens have seen increasing market credibility, with “degen” traders leading Bitcoin and Ethereum when any ETF news breaks. Overall, the statistical narrative has not changed: there is no new money in the market. It was a big part of the 2021 bull run, and it will likely play a role again in 2024-2025. For now, however, investors and traders should keep these things in mind, as well as why Bitcoin and Ethereum are not showing fatter wallets in 2023.

But first, a market update — or lack thereof

Data released by CCdata shows that trading activity in the cryptocurrency spot market reached its lowest point in more than four years last month, continuing a period of low activity on digital asset trading platforms. This lack of activity persists despite the volatility triggered by Grayscale Investments' legal victory in the U.S. Securities and Exchange Commission. After the initial excitement, the market lacks confidence to continue the bullish trend.

Specifically, centralized exchange spot trading volume fell sharply for the second consecutive month, down 7.78% to $475 billion. This is the lowest level since March 2019. Spot trading volume measures the total number of tokens exchanged in a given time frame.

Derivatives market trading volume fell by more than 12%, hitting the second lowest point since 2021. The share of derivatives in overall market activity also shrank for the third consecutive month, falling to 77.3%. In addition, the dollar value locked in open derivatives contracts fell significantly by 19.5% to $17.1 billion.

PVP Market: How Does It Affect Bitcoin, Ethereum?

Now, if readers have been following the market closely, they may have seen that small cap coins are experiencing parabolic gains. CYBER, RLB (Rollbit), SUI, UNFI, etc. So why are these assets hitting new yearly highs every week while Bitcoin and Ethereum are consolidating? Because we are currently in a structural PVP market.

PVP, or simply "Player to Player", is the term used when market movement comes from traders actually trading assets against each other. While this is generally the case, when "new money" is not coming in, any market value generated by newer, lower market cap assets is borrowed value. Most alts that were up in the past day have fallen 50% in the past few days. The lack of spot volume and the relative increase in derivatives suggests this is a PVP market.

How should traders and investors respond to this environment?

One of the key formulas to earn capital in the investment market is to trade with the trend. Currently, there is no clear, directional scenario. Bitcoin and Ethereum fluctuate in range highs and range lows, while low-cap altcoins are pump and dump in nature. In such a turbulent period, the best option is to sit back and analyze good projects that have great potential in the next bull run.