Analysis of the cryptocurrency market: new falls

Strange things are happening on the crypto market: Bitcoin lost a position of $ 36,000, and then made a timid attempt to recover around $35k. However, in this in-depth analysis, we are not interested in short-term movements, but in the macro scenario within which we will move.

At the same time, the situation is very tempting for traders, although fear and selling dominate. Why? Yes, because you don’t need to be a great expert and analyst to notice one trend (which we have written about more than once) and draw a parallel. Look at stock exchanges and cryptocurrencies: the same trajectory, with the same puppeteer.

Those who trade not only cryptocurrencies have already noticed one obvious fact: the collapse, albeit in very different percentages, affects all financial markets. We are talking not only about Bitcoin and cryptocurrencies, but also about stocks, especially in the USA and Asia. The graph shown here is very indicative.

In fact, we have very important losses for Bitcoin, which, however, are also reported in smaller proportions by the Nikkei 225, the SPX 500 – the index of the top 500 American stocks, and to an even lesser extent by European stocks.

Thus, the situation has a similar, if not identical trend, except for the slope of the curve. What we see is as much as when building up. Moreover, this relatively parallel movement should not surprise anyone, since we have been talking about it for some time.

Only one motive: depletion of liquidity?

Someone periodically talks on news sites about the capriciousness of the markets. No matter how interesting anthropomorphism is, markets do not have souls, but they respond to stimuli. We see, from the COVID crisis onwards, that a huge increase in available liquidity has been followed by large returns in all major risk sectors. Liquidity, which has found refuge mainly in stocks and cryptocurrencies.

Liquidity (such is the firm intention of the Federal Reserve System) should gradually be depleted in order to combat inflation, as Jerome Powell from the Fed himself repeatedly stated in his speech, which from December onwards was quite schizophrenic.

While it is true that sooner or later this point must be reached, it is also true that Powell’s hands are somewhat tied by market trends. Because the markets will continue to react with large sales, jeopardizing savings and even the possibility of corporate growth. After the 2009 crisis, the Fed and other central banks found themselves in the same lane. Given that the ECB still does not intend to withdraw liquidity from the market, new market shocks are possible, albeit minor.

The main cryptocurrencies – indicators of last week

It was, without a doubt, one of the worst weeks for the cryptocurrency world in recent years, when all the major cryptocurrencies on the market lost significant amounts of capitalization. In less than a week, more than 400 billion were lost, which is something absolutely incredible, given that there were already major sales before the end of the year.

• BTC

Bitcoin has shown a slow loss of value, with rapid drops in between. Price (according to Coinmarketrate.com ) at $35,000 was held, but not everyone is convinced that this could be the final bottom. However, there may be surprises in the upward direction. Now we are almost halfway to the historical maximum, more or less at the same level that we saw in May last year.

• ETH

The sales that swept the entire cryptocurrency sector on the night from Friday to Saturday did not spare Ethereum, which continues to move around $ 2,500.

A situation that perhaps few could have imagined just a few weeks ago, with a loss of 25% in a week. This leaves a bitter taste in the mouth of many investors. However, if you move away from the schedule a little, the situation is less alarming than it might seem.

As is often the case during sales of this scale, it is altcoins, not Bitcoin, that lead the loss rating. This also applies to Ethereum, which has suffered significant losses, but, in our opinion, not related to the relative strength of the protocol as such.

All universal projects have suffered, as we can see from the Solana indicators, and partly also BNB and Terra Luna, although the latter two have rebounded in an interesting way over the past 24 hours. And this despite the fact that, in fact, against the background of the effective use of Ethereum (and on the way to its transition to version 2.0), there are a number of excellent news that we are going to analyze also with some graphical accompaniment.

• Staking

This time, the criteria for evaluating the performance of Ethereum in the future come directly from the network. The first indicator we will look at is the dynamics of staking, which continues to grow in the total volume of ETH at a pace that perhaps few people could have imagined.

The number of blocked ETH has already exceeded the 9 million mark, and will not be restored until the transition to version 2.0, which should take only a few months.

• Number of addresses

There is also good news on the active wallets front. Even price fluctuations do not seem to have reduced the progressive growth, which doubled the number of wallets with at least 0.01 ETH in their portfolio. This is a sign that the network is being used despite congestion issues that have become commonplace in the DeFi sector and elsewhere.

Ethereum’s Killers Are Suffering

And all this while the “killer of Ethereum”, those projects that were supposed to send the protocol to early retirement, are suffering.

Solana, in addition to having lost a huge part of its value compared to the highs, is also experiencing cyclical technical problems that signal that a complete replacement of Ethereum is still far away.

During the sale, placing orders on AMM and other services running on SOL was not possible for a sufficiently long period of time for any questions to arise. This does not mean that Solana is not a potentially reliable project, but volumes remain problematic even for networks that are not in PoW.

The same can be said about Cardano: the public beta debut of Sundaeswap was not perfect. Of course, even the developers expected this, but nevertheless, this is an actual sign that at the technical level, no one seems to have a magic wand to solve any technical problem.

And if we want it to be a sign that we are unlikely to see Ethereum give way to competitors, although JPM and other groups offer a very positive view of narrower competition. Since a more or less normal situation is returning to the market, it is foolish to assume that ETH is doomed to disappear or, in any case, to lose, at least at the moment, the position of the second largest project by market capitalization.

Conclusion

The FOMC, or Federal Open Market Committee, will meet next Tuesday and Wednesday and should start giving more definite information about its plan to return the economy to normal. The rate hike is already widely discounted by the markets, which will reduce the level of nervousness and fear.

The Fed is unlikely to exceed market expectations, which are already quite negative. Until Tuesday and Wednesday, however, it is more than justified to expect a lot of volatility in the markets, now with a strong bearish mood and with fear, which has an indicator of – 11, regardless of the FOMC.

Is it time to abandon cryptocurrencies? Of course not! But all we can do is expect uncertainty and act accordingly. Well, what did you want?

Many people enthusiastically perceive investing in the Cue Ball of large institutional players, and then complain that the MTC has strangely changed its behavior. With each such investment, Bitcoin is less and less decentralized.