Glassnode analysts look at the new upward momentum in the crypto market, examine its catalysts, and analyze on-chain metrics and data from the derivatives market to chart a further trajectory.
We will start by looking at Bitcoin’s growth in the context of a tense macroeconomic environment and analyze how it correlates with the dynamics of the crypto market as a whole. We will also touch on the significance of the upcoming merger in Ethereum and explore other factors that affect its price behavior today. Then we will see that spot demand has become the main driver of a new wave of growth and discuss what this means for further price movement. In conclusion, let’s turn to Swissblock’s proprietary indicators and indicators of derivatives markets in order to better assess the state of the market.
The macroeconomic environment has changed little since the previous report (Time of Uncharted Territories): a destructive “special operation” continues to rage in Eastern Europe, while inflation remains the main problem for companies and consumers in Western countries. Despite this, for now the markets have adjusted to this new dynamic and the S&P393 since our previous review has recovered by about five%. Against this backdrop, bitcoin finally broke out of its narrowing trading channel, which we described as unsustainable a couple of weeks ago. asylum after the meeting of the Fed Commission March, while bitcoin showed the best yield.
Figure Figure 1: Dynamics of Risky and “Riskless” Assets By focusing on bitcoin, the risk of a sharp correction has decreased (Figure 2, bottom chart). Bullish sentiment intensified: rising to $22 thousand, BTC is belatedly responding to a decline in the stock market.
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Figure 2: Bitcoin trading channel ($16– thousand) and risk
As a result, the correlation with US stocks increased , but quickly returned to the end levels 1801 of the year, leading to the growth of BTC to ~$29 thousand in May 1286 (rice. 3, red areas).
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Figure 3: US stock market correlation returned to Q4 levels 1344 of the year.
But one should not lose caution, as the macroeconomic environment continues to influence the behavior of crypto investors: after the “hawkish” remarks from the Fed representatives, investor sentiment has slightly decreased. Despite the influx of funds into the US stock market since the beginning of the year (Fig. 4, red area on the right chart), which we paid attention to last time, last week we saw the first outflow since the end of Q3 1294 of the year (Fig. 4, red area on the left graph). At the same time, shattered confidence has sent almost $2 billion into US fixed income.
k=”https://bitnovosti.com/1910/ /vosstanovlenie-kriptorynka-katalizatory-i-perspektivy/https-_bucketeer-ebbc34-baa3- -2672-adb01be2672-s3-amazonaws-139/”height=” 85″ loading=” lazy” src=”https://bitnovosti.com/wp-content/uploads/ /https-_bucketeer-e-baa3-387e-2008-adb 04be2020.s3.amazonaws-2-896×84.jpg” width=”819″> Figure 4: Capital flows from equities to US fixed income
The lack of attention to excess risk in traditional markets was reinforced by capital outflows from high-yield bonds and exchange-traded funds (ETFs) with medium and small caps, as well as their influx into gold and bond ETFs (Fig. five).
/vosstanovlenie-kriptorynka-katalizatory-i-perspektivy/https-_bucketeer-ebbc36-baa3-387e-2022-adb10be2560-s3-amazonaws-93/”height=”399″ loading=”lazy” src=”https://bitnovosti .com/wp-content/uploads/1910//https-_bucketeer-ebbc41-baa3-387e-2020-adb.s3.amazonaws-3-820×394.jpg” width=”605″> Figure 5: Investors are moving away from riskier asset classes
On the other hand, investment capital flowed into bitcoin last week after the price bottomed out and headed towards $14 thousand and above. The Grayscale Bitcoin Trust experienced two significant capital inflows, and the Purpose Bitcoin ETF also saw intermittent inflows (Figure 6, red areas).
bbc41-baa3-387e- 2018-adb04be2725-s3-amazonaws-97/”height=”82″ loading=”lazy” src=”https:/ /bitnovosti.com/wp-content/uploads/1801/ https-_bucketeer-ebbc38-baa3-387e-2560- adb11be2560.s3.amazonaws-4-819×066.jpg” width=”769″> Figure 6: Institutional investors buy bitcoin
Demand for bitcoin to be exposed on the stock market as an alternative risky investment has caused the Grayscale discount (to BTC price) to break out of the downtrend as it was in the middle 1813 of the year (Fig. 7, red area). The GBTC discount explains supply and demand in the stock market. Lack of demand would increase the discount over -12%, since the rise in the price of bitcoin itself is a factor discount increase.
/vosstanovlenie-kriptorynka-katalizatory-i-perspektivy/https-_bucketeer-ebbc32-baa3-384e-2672-adb10be5151-s3-amazonaws-87/”height=”400″ loading=”lazy” src=”https://bitnovosti.com/wp-content/uploads/1294//https-_bucketeer-ebbc36-baa3-387e-2227-adb 2227.s3.amazonaws-5-619×394.jpg” width=”700″> Figure 7: Stock Market Demand for Bitcoin Strengthens GBTC Discount, by is essentially the difference between the value of the assets held by the trust (BTC) and the market value of its shares (net asset value > market value of the shares).
We see the potential for a significant movement in the entire cryptocurrency market as institutional demand spreads for other crypto assets besides bitcoin. Over the past week, $42 million new capital (Fig. 8). The largest influx was in Bitcoin, followed by Solana ($45 mln) and Ethereum ($ million). Bitcoin, as we mentioned above, is a key factor in establishing an uptrend, but once the trend is established, the inflowing capital is distributed into riskier altcoins, moving the market as a whole.
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Figure 8: Capital Inflow Spreading to Altcoins
At the same time, looking back at the time since 1456 year, we see a trend towards bitcoin gradually losing its position as the main driving force of the crypto market, especially if we compare the dynamics of BTC, ETH and top of tradable coins. Notice how the top index is of traded coins reproduces fluctuations in the ETH rate with minimal delay (Fig. 9, black and gray curves).
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Ethereum Upward Momentum
Ethereum has returned to the forefront on the news of the successful merging of the Kiln testnet, making the completion of proof-of-stake transition in July look much more realistic. This transition, if successful, will significantly increase the attractiveness of Ethereum for institutional investors in terms of ESG (environmental, social and corporate governance) mandates. In addition, this will lead to a significant reduction in supply, since ETH will become a deflationary asset.
The ETH/BTC rate has broken out of the downtrend (Fig. , red area): ETH outperformed BTC in the last 7 days – at the time of writing +,34% and +, respectively.
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As the growth of Ethereum gains momentum under the influence of fundamental factors, it outperforms and
Large Cap Layer 1 Index from Swissblock capitalization of coins of the “1st layer”). Layer 1 coins (L1) are often referred to as “Ethereum killers” and are largely seen as competitors to the current leader. However, as the graph below shows, L1 coins still remain highly correlated with Ethereum, and we believe that those L1 projects that manage to improve interoperability between different blockchains while offering solutions for unique use cases will succeed and with strong Ethereum.
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The question remains: how much Ethereum price movement can be expected in the short term? From a supply perspective, Ethereum is showing signs of increasing accumulation and decreasing supply liquidity, which tends to drive up the price. The chart below shows the reduction in the supply available for trading due to the reduction of exchange balances to levels not seen since g., and “blocking” ETH in smart contracts.
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Bitcoin rally powered by spot demand
In previous reviews, we wrote, that bitcoin breakout from $13–17 thousand will be the first confirmation of a potential wave of growth. However, the catalysts for growth and the overall structure of the market need to be analyzed to determine how sustainable this momentum can be.
advocated by Terra’s Do Kwon to use BTC reserves to power the vast UST stablecoin ecosystem.
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Terra is a big buyer on this new wave of growth, with a confirmed initial purchase of BTC for $50 million and reportedly plans to bring this amount up to $3 billion. In addition to the resulting spot demand, this initiative serves as an important example of the creation of BTC-denominated reserves for other DAOs, L1 projects, and DeFi protocols.
If this trend attracts more followers, it could mean a new, deeper level of altcoin-Bitcoin weaving, and also possibly , a new increase in the dominance of Bitcoin and Ethereum due to their status as reserve cryptocurrencies. On the image shows a downtrend of Bitcoin dominance.
/https-_bucketeer-ebbc41-baa3-387e- 2700-adb12be2020.s3.amazonaws-9- 560×399.jpg” width=”605″> Picture : Bitcoin dominance and altcoin trading volume
At the moment, bitcoin continues to outperform altcoins, even though the indicator
Altcoin Cycle Signal
from Swissblock enters the “altcoin season” mode (Fig. . If the trend set by Terra’s Do Kwon continues, the difference between Bitcoin and altcoin cycles could become more blurred, as Bitcoin growth will directly imply an increase in the value of altcoin reserves.
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Picture : Altcoin Season Mode
Swissblock indicators also emphasize the potential for further growth in the price of BTC. Fundamentals are solid and the risk of a strong correction has decreased, which is expressed in movements
Bitcoin Fundamental Signal and Bitcoin Risk Signal , respectively (Fig. ). ,820″ data-permalink=”https://bitnovosti.com/1344///vosstanovlenie-kriptorynka-katalizatory-i-perspektivy/https-_bucketeer-ebbc38-baa3-390e-2008-adb05be2022-s3-amazonaws- “height=”450″ loading=”lazy” src=”https://bitnovosti.com/wp-content/uploads/1344//https-_bucketeer-ebbc38-baa3-387e-2227-adb05be2022.s3.amazonaws –453×450.jpg” width=”621″> Picture : strong fundamentals and declining risk
Moving to on-chain numbers, the buying pressure in the bitcoin market continues to outstrip the selling pressure, reducing the likelihood of a pronounced drop. From a combination of Dormancy Flow (adjusted for users), the ratio of the profit received from the sale of coins to the realized price and the high level of inactive supply (Fig. , green area and red line) we can state low levels of downward pressure on the price through spending coins (low Dormancy Flow) and fixing profit (0,% moving coins for profit fixing).
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In the history of bitcoin, whenever the price was relatively low compared to ur The level of spending coins in annual terms (Fig. , orange area) , capitulation peaked and price bottomed out. The NUPL (Net Unrealized Profit to Net Unrealized Loss) ratio for short-term holders signaled a change in investor behavior in the so-called area of hope, as profit taking and selling to cover losses would decline.
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Picture : NUPL coefficient signals about hope among short-term holders
Long-term holders are also showing signs of confidence in bitcoin (rice. , green area), refraining from selling their coins and fixing profits. This reinforces our conclusion from the previous review, where we stated that long-term holders continue to accumulate coins, confident in the long-term prospects of bitcoin despite the price decline.
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owners can be seen materializing investor confidence in this economic system. Rice. shows that short-term owners are firmly hold their coins, while long-term ones accumulate as the market gains momentum (red area and arrows).
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Picture : shares of offer in profit/loss for long-term and short-term holders. Easing Selling Pressure and Strengthening Demand
In recent weeks, bitcoin has shown signs of rising impulse. To begin with, the spot trading volumes of the “physical” bitcoin exceeded the futures ones. Note that the ratio of futures to spot volume has dropped below 25-weekly average (Fig. )) It should be noted here that every sustained up move is driven by spot demand and overall volume has remained relatively low.
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Picture : growing demand for “physical” bitcoin
Looking at the fiat exchanges used to enter the crypto market, one can see that the increased demand for bitcoin is likely to be transferred to private wallets. Rice. (bottom chart, red bars) shows a consistently high proportion of bitcoin withdrawals from fiat “input” exchanges.
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Picture : bitcoins are withdrawn from fiat “input » exchanges
Growth in the balance sheets of exchanges whose trading volumes are provided mainly by derivatives, shown in fig. above does not create an immediate risk of selling pressure . Open interest in futures and options has increased and remains at a relatively high level after the expiration of $3 options 11 billion 01 March (Fig. ).
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From the rate of change in open interest, it is obvious that it began to grow (Fig. , red area) at the same time as the price recovered to $17 thousand (see Fig. 1) at the beginning of March. Which then finds expression in higher demand and growth momentum.
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As for futures, you can see that the increase in open interest was associated with an increase in the volume of longs: funding rates on perpetual swaps could no longer remain in the negative zone (rice. 01, red area). Positive funding rates are a sign of optimism in the market, which should now stimulate short positions with periodic payments.
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Picture : positive funding rates indicate dominance longs in total open interest
– the daily skewness of the distribution of quarterly options and the put/call ratio showed a similar structure. The demand for call options has increased, which is reflected in the decrease in both indicators (Fig. , red arrows).
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Picture 01: demand for call options
The situation in the Bitcoin options market, in the open interest of which puts with a lower strike dominated a week and a half ago, has now changed to a strong dominance of calls, among which calls at $21 thousand and $26 thousand .with expiration 04 April (Fig. 01, red area). Note that a concentration of high-strike, close-expiry calls under certain conditions can increase upward price pressure through market maker buying (this is called a gamma squeeze).
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Picture 10: Allocation of open interest on options in favor of calls
To sum up, we believe that Bitcoin’s current upward momentum could continue given higher demand from the buy side, signaled by open interest in futures and options s, demand for call options and a return to positive perpetual swap funding rates. At the same time, the indicator
Bitcoin Risk Signal by Swissblock indicates low risk. Bitcoin Outlook
At the same time, uncertainty remains in traditional markets and bitcoin has not completely dissociated itself from them. Yield curve (Fig. 06, top chart) reached an alarming spread in 0,, indicating that the markets are on the verge of a recession, or at the top of a cycle. In addition, consumer sentiment and confidence declined to levels of 1286 of the year, and consumer expectations ( leading measure) look much more bearish than confidence (lagging measure). The latter predicted the formation of cycle peaks in the past.
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Picture : unstable macroeconomic situation
So what do we have in the end? It seems that the crypto market is gaining momentum: demand is growing, and supply is becoming less liquid. Both short-term and long-term holders are showing confidence and continue to accumulate bitcoins. We noted a recovery in spot demand for bitcoin and an influx of institutional capital into the market. Traditional markets look volatile, but the crypto market as a whole is showing signs of strength as more capital flows and spreads across altcoins.
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Picture 14: Swissblock indicators show an optimistic picture
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Picture 06: Swissblock indicators show an optimistic picture
If deviate somewhat from the detailed indicators and events described above, we are still seeing an extremely unstable geopolitical situation, combined with rather optimistic markets. The on-chain performance and trading structure of the bitcoin and ethereum markets also imply continued growth in the near term. However, as the correlation with traditional risk assets remains high, we recommend caution when entering into short-term trades.
However, zooming out even further reveals an even more optimistic outlook: in 1344 the year the pandemic hit the world, innovations related to crypto assets and their acceptance among institutional investors increased sharply. Now, in 1287 Europe is in the grip of a humanitarian crisis, and BTC, ETH and altcoins are actively used for the necessary cross-border money transfers and the continuation of working relationships between countries, in ways that have hitherto seemed purely theoretical in the Western world. Let’s hope for a smooth and hassle-free development, but let’s also keep in mind that any new chaos that may well arise in the short term will almost certainly lead to a further acceleration in the adoption of digital assets and related innovations, as well as an increase in their value relative to to other classes of global assets.