The results of the week on the crypto market: a strategic victory for the bears

In the key battle of the mid-halving (the middle of the period between two halvings), the bulls suffered a crushing defeat: they not only failed to storm the key $50 level 000, but also allowed the price of bitcoin to return to the side channel of correction.

Market Review

The unjustified enthusiasm of many crypto-investors has collided with an objective reality dominated by negative fundamental factors (fed’s contractionary monetary policy, ongoing active hostilities in Ukraine and increasing regulatory pressure in many countries). The bulls were not helped either by the influx of investments in previous weeks, or the accumulation of whales, or the main event in the world of cryptocurrencies – Bitcoin Conference 2022, which took place last week. The bears have confidently seized the initiative, and the negative trend may continue in the coming weeks and even months.

As of April 10, the price of bitcoin is $42,793 (a drop of 7.9% over the week), and the bitcoin dominance index (according to TradingView) remains at 41.60%, i.e. its fall is proportional to the decrease in the capitalization of the entire crypto market.

Change in BTC/USD since the beginning of the year: the price has returned to the lateral correction channel and is approaching the zone of maximum risk. Source – Glassnode Uncharted and Swissblock technologies

Many long positions have been liquidated due to the sharp decline in the price of bitcoin. In general, market volatility may remain high, because more and more crypto investors are forced to reconsider their original plans.

According to Glassnode Uncharted, the long-term growth of bitcoin and the crypto market as a whole is not in danger. The accumulation of profits by investors has lagged far behind the overall growth of the crypto market, leaving significant potential for sustainable growth in the future. At the same time, short-term fluctuations can remain significant, as traders can be extremely sensitive to any news signals and access to cheap credit resources.

Dynamics of net unrealized income and change in the net position of hodlers: long-term growth and short-term fluctuations. Source – Glassnode Uncharted and Swissblock technologies

Percentage-wise, the share of whale transactions has fallen to its lowest level since August 2012, according to analyst firm Santiment. On the one hand, this suggests that cryptocurrencies have already significantly integrated into the overall financial and economic system, and many private investors make transactions with bitcoin. On the other hand, many whales are in no hurry to increase their reserves in BTC, expecting an even more significant decline in the asset price in the near future.

Share of whale transactions in total BTC transactions: abnormally low. Source – Santiment

Ethereum’s price decline was comparable to that of Bitcoin: -7.1% compared to last week, the price of Ethereum is $3,250 as of April 10th.

Change in ETH/USD for the week: a steady decline in the first half. Source – CoinGecko

There is a discrepancy in the dynamics of the ETH / USD exchange rate and the activity of social network users in the context of the Ethereum discussion. Thus, only professional investors and traders are carefully monitoring the transition to Ethereum 2.0, while many other market participants do not show significant interest in the coin at this stage.

Divergence in medium-term price dynamics Ethereum and discussions on social media. Source – Santiment

As for the average cost of transactions in the Ethereum network, it has been showing an increase in recent weeks. Thus, the number of projects implemented on Ethereum is increasing, and many investors and developers are not willing to switch to cheaper, but less reliable counterparts (such as Solana).

Comparison of course dynamics ETH/USD and the amount of transaction costs in the network Ethereum. Source – Santiment

The market capitalization of Tether continues to grow steadily against the backdrop of a new, bearish, phase of the crypto market. According to CoinGecko, Tether capitalization reached $82.58 billion (+0.3% for the week). Traders are trying to reduce their risks with stablecoins at this stage.

Tether capitalization dynamics for the week: steady growth. Source – CoinGecko

The total number of Tether holders increased even more significantly, especially in the second half of the week. It reached 4.47 million, showing an increase of 0.7% for the week. According to CoinMarketCap, USDT concentration remains quite high, with the top 10 holders accumulating 26.83% of the total USDT in the market.

Total number of Tether holders: Significant increase over the week. Source – CoinMarketCap

None of the top 10 cryptocurrencies could keep from falling. Among the biggest losers of the week are Solana (-18.8%), which is a less stable asset than Ethereum, and Terra (-18.4%), which has corrected after a very significant increase in previous weeks. Of the TOP-20 cryptocurrencies, only Dogecoin remained in positive territory (+5.2%) at the end of the week against the backdrop of news about Elon Musk’s new investments on Twitter (according to Deutsche Welle).

Events in the crypto industry

• Tesla, Block and Blockstream join forces to mine bitcoin using solar energy – ForkLog.
• Terra purchased Avalanche tokens for the first time (worth $200 million) to improve the backing of its UST-Terra stablecoins.
• Polygon is developing a new Avail blockchain that will allow for even greater scalability – Polygon.
• Coinbase launches crypto trading platform in India – CoinDesk.
• A copy of the first-ever tweet in NFT form is up for sale at a price of $48 million on the OpenSea platform – Bloomberg.
• Whales have increased their demand for the following stablecoins: USDT, USDC, BUSD, TUSD and DAI – Santiment.
• The algorithmic stablecoin USDN collapsed in price by 25% amid information about possible price manipulations by the owners of Waves (read about the risks of stablecoins in our material) – IntoTheBlock.

Sharp decline in market value USDN against the backdrop of news of price manipulation and subsequent partial recovery. Source – IntoTheBlock

Expert opinions

According to CoinDesk cryptanalyst Shaurya Malva, the decline in the price of bitcoin below $45,000 should not be prolonged. The main reasons for this phenomenon are high purchasing activity and net inflow of investments. At the same time, the expert recognizes the serious pressure exerted by the Fed by raising the base lending rate. IDX Digital Assets analyst Ben McMillan sees the $43,000 price level as key to bitcoin’s mid-term performance. It can serve as both a strong support and resistance level, according to Forbes. The head of the analytical department at Ledl, Armando Aguilar, believes that the only serious support level for the first cryptocurrency is $42,000, after which the price is likely to fall to $39,000. .

Expectations for this week

The bears’ strategic victory allowed them to return the BTC price dynamics to the lateral correction channel, which determined pricing in the last 3 months. Moreover, now the dominance of the downtrend is becoming obvious, with a likely decline in the price of bitcoin to the lower limit of the price range. If successful, the bears will try to break through the side channel down, i.e. lower the price below $38,000–$39,000, which could lead to a new wave of rapid decline in the crypto market capitalization, comparable to a sharp correction in November-January.

Well BTC/USD returned to the side channel of the correction: the dominance of the bears. Source – CoinGecko

For the market to turn around, bulls need to stay in the sideways correction channel and accumulate additional trading volumes in order to exceed the $45,000 level and move towards $50,000. However, without a change in the underlying fundamental factors, traders may not have grounds for optimism. In the case of a horizontal movement of the crypto market as a whole, Cardano and Terra can show moderate growth due to the systematic development of these projects and the influx of new investments.

Sources: CoinDesk, CoinGecko, CoinMarketCap, Santiment, Glassnode Uncharted, Swissblock Technlogies, TradingView, Forbes, Bloomberg, Deutsche Welle, IntoTheBlock, Polygon, ForkLog, Terra

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.