The results of the week on the crypto market: crypto winter and the growth of meme tokens

Bears continue to increase pressure on the crypto market, seeking to reduce its capitalization. Only Ripple and mem tokens remain resistant to crypto-winter and show moderate growth.

Market Review

As expected, the success of the previous weeks allows the bears to build their advantage, especially at the expense of bitcoin and major altcoins. According to Alternative, the index of fear and greed of Bitcoin is 28/100, and Ethereum is 36/100, which corresponds to the “fear” criterion. A further decline in the capitalization of major cryptocurrencies can lead to a panic in the crypto market with disastrous consequences for many projects. Moreover, record inflation (according to Barron’s) leads to ever-increasing pressure on the US Federal Reserve to seriously increase the base discount rate, which will limit access to credit resources for crypto investors.

As of April 17, the BTC price is $40,347 (down 5.7% over the week), and the Bitcoin dominance index (according to TradingView) has slightly decreased to 41.50%, although the share of the asset usually increases during periods of recession.

Bitcoin Price Action and Increasing Bear Pressure: Many Short-Term Investors Sell BTC and suffer losses. Sources – Glassnode UnchartedSwissblock Technologies

The growing concern of virtual currency holders regarding new taxes on crypto transactions is leading to an unwillingness to hold unprofitable positions for an extended period of time. Nevertheless, the total supply of bitcoin, which brings profit to its owners, still exceeds 69%, while the last three local lows corresponded approximately to the level of 62.5% (according to On-Chain College). If this trend continues, then Bitcoin may further decline in price in the coming weeks.

The dynamics of the total supply of bitcoin that generates profit: the coin has not yet reached a local minimum. Sources – Glassnode, On–Chain College

In addition, the number of activated addresses among those who have not made any transactions for a long time has reached a 3-week high, according to Santiment. This means that many holders fear further price declines and either take profits or minimize losses. The growth in cryptocurrency sales also contributes to the extension of the crypto winter at this stage.

Change in turnover of historically inactive BTC-tokens: maximum level for the last 3 weeks. Source – Santiment

The dynamics of Ethereum capitalization approximately corresponds to the dynamics of bitcoin: -6.9% at the end of the week, the price of ETH is $3,042 as of April 17. The level of discussion of the air in social networks remains stable.

Price dynamics ETH and network discussion volume Ethereum on social media per week. Source – Santiment

At the same time, the volume of ETH staking is still quite high, and a new wave of growth may exceed the all-time high. This indicates progress in the transition to Ethereum 2.0, although it will not be completed in June, as previously planned, according to CoinDesk.

Equivalent Dynamics ETH in US dollars, aimed at staking: fluctuations around the historical maximum. Source – IntoTheBlock

Nevertheless, there is no recovery of activity in the Ethereum network, and the general negative trend of transaction costs (gas fees) continues. At the moment, many investors and developers are in no hurry to launch new projects on Ethereum, waiting for better market conditions.

Dynamics of transaction costs in the network Ethereum: fluctuations around the local minimum. Source – IntoTheBlock

Tether is increasing its capitalization, which allows it to confidently gain a foothold in 3rd place in the overall rating of cryptocurrencies. According to CoinGecko, Tether’s capitalization is approximately $82.83 billion (+0.3% for the week). Investing in USDT is perceived by many investors as less risky in the short term.

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

The total number of USDT holder addresses is also growing steadily. It reached 4.49 million, showing an increase of 0.5% for the week. According to CoinMarketCap, the top 10 Tether holders further increased their market dominance, accumulating 27.07% of the total stablecoin supply in the market.

Total number of Tether holders: Strong growth over the week. Source – CoinMarketCap

Of the top 10 cryptocurrencies, only Ripple remained in positive territory at the end of the week (+2.2%), which is quite typical for the crypto market, since Ripple is not so strongly correlated with Bitcoin and Ethereum and quite often shows growth in a declining market. Meme tokens, which are currently in the TOP-15, also showed good results: Dogecoin remained at about the same level of capitalization (although it experienced a sharp rise in value in the second half of the week against the backdrop of Elon Musk’s plans to acquire Twitter), and Shiba Inu added 4.9% from a placement on the Robinhood platform expected by many SHIB holders, according to ForkLog.

Course dynamics SHIB/USD for the week: exponential growth in the middle of the week (against the news about the platform Robin Hood) and subsequent stabilization. Source – CoinMarketCap

Events in the crypto industry

• US inflation hits record high since 1981 — 8.5% per annum; The Fed is developing a new package of monetary regulation that will affect investment activity, including in the crypto market – The Guardian.
• Leading airline from the UAE — Emirates — plans to actively participate in the development of NFT and Metaverse in order to generate additional income and expand the services provided to its customers — Bloomberg.
• Uniswap topped the ranking of the most actively developing crypto projects by the intensity of GitHub developer activity — sentiment.
• Luna Foundation invests additional $100 million to replenish its bitcoin holdings — Terra.
• Auction house Sotheby’s has announced a unique NFT auction dedicated to procedural art (generative art), integrating computer technology and various areas of art — The block.
• Ethereum has successfully passed proof-of-stake testing on a blockchain fork as part of the ongoing transition to Ethereum 2.0 — The block.
• Mozilla will only accept financial aid in proof-of-stake cryptocurrencies (for environmental reasons) — Mozilla.

Expert opinions

According to CoinDesk crypto analysts, the price of bitcoin is almost guaranteed to drop to $37,000 based on technical analysis. Moreover, they consider it likely to fall to $33,000 in the medium term. FxPro Chief Financial Analyst Alex Kuptsikevich defines the price of $38,000 as an indicator of further market movement. If the price of bitcoin falls below this level, the negative trend may intensify, according to Forbes. At the same time, some crypto analysts remain extremely optimistic about the prospects for bitcoin in the coming months. Thus, Nexo expert Anthony Trenchev talks about the possibility of a rise in the price of bitcoin to $100,000 over the next 12 months (according to Forbes). At the same time, most analysts expect high volatility of the crypto market in the coming weeks. — as an indicator of dependence on the macro-financial environment and the news background.

Expectations for this week

The bears have effectively reduced the market price to the lower boundary of the sideways correction channel, which allows them to attempt to break the channel down and move to a more rapid correction in the coming weeks. With their new successful attack, the main short-term target could be the $35,000 support level, which is a local low since the beginning of 2022. The next critical support level for at least the last year is in the region of $28,000–$30,000, which is also the last frontier before the bulls completely capitulate.

Well BTC/USD bearish pressure: key support levels. Source – CoinGecko

The main task of the bulls— stay in the current correction channel and strive to get closer to its upper limit. The Bitcoin price level of $42,000-$45,000 is key to accumulating the necessary volumes for a market reversal. Nevertheless, the regulatory policy in the US and a number of other countries, as well as macroeconomic risks, leave low chances for the bulls in the coming weeks. The development of the Avalanche and Polkadot ecosystem may allow them to strengthen their position in the altcoin market. Ripple may also show moderate growth.

Sources: CoinDesk, CoinGecko, CoinMarketCap, Santiment, Glassnode Uncharted, Swissblock Technlogies, TradingView, Forbes, Bloomberg, IntoTheBlock, ForkLog, Terra, Mozilla, The Block, The Guardian, Barron’s, On-Chain College, Glassnode

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.