LMAX Digital volumes were healthy on Wednesday. Total notional volume came in at $231 million, 5% above 30-day average volume.

Breaking it down per coin, bitcoin volume came in at $119 million, 1% above 30-day average volume. Ether volume came in at $47 million, 37% above 30-day average volume.

Looking at average position size over the past 30 days, we’re seeing average bitcoin position size at $6,011 and average position size for ether at $1,226.

Volatility is consolidating after a sharp rise out from extremely subdued readings and multi-month lows. We’re looking at average daily ranges in bitcoin and ether of $2,207 and $92 respectively.

The crypto market continues to hold up well into dips. We continue to see the latest price action as necessary consolidation following an exceptionally strong move higher.

Rather than evidence that the market is preparing for a renewed period of weakness, we believe this is the type of digestion that should ultimately help set the stage for another healthy move higher.

Indeed, the ability of Bitcoin and Ethereum to absorb profit-taking without giving back a meaningful portion of the recent advance is encouraging. Technical studies had become stretched following the surge and were in need of some unwinding.

Some sideways trade and corrective price action are therefore exactly what we would expect to see if the market is preparing for another leg higher. So far, there has been little in the price action to suggest the broader recovery is being compromised.

The fundamental backdrop also remains supportive. Institutional demand continues to be an important pillar, with roughly $3.5 billion of ETF inflows during August, while flows have remained relatively resilient into September.

After $236.5 million of outflows on September 1, Bitcoin ETFs returned to approximately $101.1 million of inflows on September 2, suggesting underlying demand remains intact despite the consolidation.

The macro environment could also become increasingly constructive. Markets have moved aggressively to price a more hawkish Federal Reserve outlook, with the probability of another rate hike rising substantially.

We believe positioning may now have become too aggressive in that direction. This leaves room for softer US employment data to pull Treasury yields and the Dollar lower and provide another potential tailwind for crypto.

Overall, we continue to believe the evidence points to a major cycle low having already been established, with the latest consolidation doing more to strengthen than undermine the broader recovery.

The combination of improving technical structure, resilient institutional demand, a supportive regulatory backdrop and the potential for Fed expectations to swing back in a more favorable direction keeps us constructive and looking for the next meaningful move higher.