Results of the Week on the Crypto Market: Sideways Correction and Regulatory Uncertainty

The past week did not lead to significant changes in the capitalization of most cryptocurrencies, but regulatory initiatives have significant short- and long-term consequences for investors.

Market Review

According to CoinMarketCap, the capitalization of the crypto market has decreased slightly (by 1.3%) over the past week. At the same time, most of the major cryptocurrencies showed a deviation from their weekly performance within 5%.

Quite atypically, the dynamics of the price and capitalization of bitcoin turned out to be opposite to the trend of the crypto market as a whole – these figures increased by 1.5%: to $42,121 and $799.1 billion, respectively. The share of BTC (the ratio of bitcoin capitalization to the total crypto market capitalization) has grown to 40.66%, and this may signal the conservatism of many investors amid market risks.

Weekly change in BTC/USD: optimism in the first half of the week, followed by skepticism in the second half. Source – Binance

The number of bitcoin holders who did not carry out any operations with coins has been growing rapidly over the past year. This means that many investors are moving to the HODL strategy – long-term storage of cryptocurrency during periods of recession.

Percentage of BTC holders who have not transacted in the last year: Current level is over 60%. Source – Glassnode

The average volume of BTC transactions is starting to rise, reaching $1.013 million, the highest in the last month. This may mean the desire of investors to reduce the level of portfolio risk by increasing the share of the market leader in it.

Average transaction volume BTC: Rapid growth in the last month. Source – Glassnode

According to CoinGecko, the demand for Ethereum has been subject to large fluctuations compared to Bitcoin. The price and capitalization of the main altcoin decreased by 5%: to $2,856.79 and $342.9 billion. Investors traditionally consider Ethereum a less effective store of value than BTC.

Weekly change in ETH/USD: sharper decline in the second half of the week. Source – Binance

The number of large Ethereum holders continues to decline. Thus, the number of addresses with a balance of more than 1,000 ETH has reached a minimum value for 4 years – 6,226. Consequently, an increasing number of whales doubt the medium-term prospects of Ethereum.

Dynamics of large holders of ETH (more than 1,000 coins). Source – Glassnode

The average transaction volume in the Ethereum network demonstrates the dynamics opposite to the similar BTC metric: it fell to $298.49, the lowest level over the past month. Thus, investors are actively reorienting from Ethereum to Bitcoin and other cryptocurrencies that can show positive dynamics during a recession.

Ethereum Average Transaction Volume: A steady decline in the last month. Source – Glassnode

The third cryptocurrency by capitalization – Tether – has not changed in price, since it is a stablecoin. The structure of USDT holders continues to be dominated by medium-term investors (1-12 months), although the share of hodlers is also increasing.

Dynamics of the number of addresses by Tether storage time. Source – IntoTheBlock

The number of active Tether addresses continues to decline, i.e. investors do not see significant opportunities for profitable investments.

Dynamics of active Tether addresses. Source – IntoTheBlock

There have been several changes in the structure of the TOP-10 cryptocurrencies. In particular, the relative positions of Ripple (+20.5%), Cardano (-7.7%) and Solana (-19.0%) changed from February 7 to 13. In addition, Dogecoin added 3.8% against the backdrop of renewed interest in meme tokens and ousted Polkadot from the TOP-10.

Events in the crypto industry

• Bitcoin News reports that the drop in demand for Ethereum has led to a significant reduction in transaction costs (gas fees) in the ETH network – to the level of $15.13, the lowest since September last year.
• The Canadian branch of KPMG has invested part of the reserves in bitcoin and ether, and also declares interest in NFT, DeFi and the metaverse, RBC reports.
• The Shiba Inu price skyrocketed by more than 35% from February 7th to 13th. This happened against the backdrop of a correction after the previous fall and the launch of a new project for the Shibaverse metaverse, according to Yahoo Finance.
• The equivalent of $3.6 billion worth of stolen BTC from the Bitfinex exchange has been seized by the US Department of Justice and will be returned to their owners, Bloomberg reports.
• Russian Authorities Reach Consensus to Ban BTC Payments, Though Official Regulatory Documents Have Not Been Adopted Yet – Bitcoin News.
• The US Securities and Exchange Commission has initiated enhanced controls on cryptocurrencies and electronic assets, reports the Financial Times.
• Kazakhstan plans to increase taxes for miners several times on behalf of the President of Kazakhstan Tokaev – RBC.

Expert opinions

Analysts at the largest investment bank JPMorgan estimate the long-term value of bitcoin at $150,000, while the reasonable current level of cryptocurrency, in their opinion, corresponds to $38,000. this year. According to NewsBTC experts, the decline in the price of the first cryptocurrency below the 50-day moving average is a strong bearish signal, i.e., the fall may accelerate. Well-known market analyst Justin Bennett believes that a market reversal is possible only after BTC fixes above the level of $45,000–$46,000.

At the same time, long-term and strategic investment in bitcoin remains reasonable according to investor Bill Miller, who positions BTC as insurance against global financial risks. Expert Humphrey Young considers the strategy of holding long positions to be optimal for long-term crypto investors, drawing an analogy with the situation on the market four years ago. Thus, the general consensus is that the current correction is likely to continue under increasing regulatory pressure, but it does not threaten the strategic position of the crypto market in the long term.

Sources: Time, Forbes, NewsBTC, RBC, Bitcoin News, Financial Times, Bloomberg, Yahoo Finance, IntoTheBlock, Glassnode, CoinGecko, CoinMarketCap

Disclaimer. Investing in any financial asset carries the risk of losing capital. Nothing in this text can be considered an investment recommendation or an offer to buy/sell any financial instruments. For all their actions in the stock market, each investor bears full responsibility independently.