The crypto market has showcased its resilience in recent times, outperforming traditional assets like equities. This can be attributed to a significant repricing in monetary policy expectations and short futures liquidations at the beginning of last week. However, the short-term outperformance encountered limitations due to stronger-than-expected US jobs data, leading to a reversal in US Treasury yields and a decrease in overall risk appetite across traditional financial markets.
During this period, altcoins gained momentum and outperformed Bitcoin, which is a strong indication of a “high-risk appetite” within the crypto market. Notably, cryptocurrencies like Avalanche (AVAX) and Cardano (ADA) delivered impressive returns of over 50%. Among the top 10 crypto assets, Avalanche, Cardano, and Polkadot (DOT) stood out as the relative outperformers.
On-chain data for Bitcoin suggests that investors are increasingly taking profits, as evidenced by the rising number of coins in profit being sent to exchanges. Despite this, the overall market sentiment, as indicated by ETC Group’s in-house Crypto Asset Sentiment Index, remained relatively elevated. However, major reversals to the downside were observed in the Crypto Dispersion Index and the BTC 25-delta 1-month option skew.
The Crypto Fear & Greed Index continued to reside in “Greed” territory, reflecting ongoing market optimism. ETC Group’s Cross Asset Risk Appetite (CARA) measure slightly declined but remained in positive territory, signaling a decrease in risk appetite in traditional financial markets. While performance dispersion among digital assets decreased compared to the previous week, it still remained relatively high. This implies that correlations among crypto assets have decreased, and investments are driven by coin-specific factors, emphasizing the importance of diversification.
The market overall remains in a strong profit environment, with a significant percentage of Bitcoin and Ethereum addresses in profit. As Bitcoin approaches recent highs, profit-taking activity has increased, particularly among short-term holders, resulting in higher selling pressure. Additionally, long-term holders have been transferring profitable coins to exchanges, potentially hindering short-term price increases. However, there is no evidence of older coins being spent, which would indicate a larger price correction.
Aggregate open interest in BTC futures and perpetual remained stable, with notable futures short liquidations being recorded. BTC option open interest saw a significant increase, accompanied by relative put-buying and an increase in the put-call open interest ratio. The 25-delta BTC option skews also increased, indicating higher demand for puts compared to calls. However, overall at-the-money implied volatilities did not change significantly.
Overall, at the time of writing, Bitcoin has lost its $42,000 support line, trading at $41,600, down 5% in the last 24 hours. The current state of the crypto market is characterized by the interplay between profit-taking activity, altcoin outperformance, and investor sentiment. The market remains optimistic, but recent events have led to a decline in risk appetite. As the crypto market continues to evolve, it is crucial for investors to stay informed about the various factors affecting its dynamics and to make well-informed decisions based on the available data.
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