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The bulls made a desperate attempt to storm the $45,000 level of bitcoin, but could not resist the pressure of such objective factors as the confrontation between the West and Russia in the context of likely full-scale military operations in Ukraine and the expected increase in the Fed discount rate in March. Despite the general decline in the crypto market, stablecoins and Avalanche showed moderate growth.
The total capitalization of the crypto market is expected to continue to decline. According to CoinMarketCap, the negative dynamics was -7.5% over the past week (February 13-20). Bitcoin and Ethereum weakened their positions by 6.6% and 8.6%, respectively; at the same time, the Avalanche currency (+0.4%) managed to improve its performance. The share of BTC (the ratio of bitcoin capitalization to the total crypto market capitalization) continues to increase, reaching 41.75%. Thus, many investors refuse high-risk projects and prefer the main cryptocurrency. According to CoinGecko, the price of bitcoin as of February 20 is $38,305.
Change in BTC/USD for the week: a slight increase at the beginning and a rapid decline in the following days. Source – CoinGecko
The number of long-term Bitcoin holders continues to increase. Thus, hodlers form the backbone of stable demand for bitcoin, while traders and short-term holders are abandoning the main cryptocurrency at this stage.
The number of BTC holders who made the last transaction 1-2 years ago: the current level is the highest in the last 14 months. Source – Glassnode
The volume of BTC futures contracts continues to decline, as a sign of growing uncertainty and a decrease in the share of speculative capital. An increasing number of market participants are skeptical about the medium-term prospects of the crypto market.
Dynamics of BTC futures volumes: a rapid fall in recent months. Source – Glassnode
According to CoinGecko, demand for Ethereum has declined even more than for Bitcoin. The price of the main altcoin as of February 20 is $2,643. A more rapid decline in the capitalization of Ethereum may be due to the continuation of the main phase of its correction, as well as the protracted transition to Ethereum 2.0.
Weekly change in ETH/USD: accelerating price decline in recent days. Source – CoinGecko
The volume of ETH withdrawn from exchanges continues to decline. On the one hand, this may mean that the most rapid correction is over. On the other hand, hodlers have already accumulated a sufficient amount of Ethereum in previous weeks, and the short-term dynamics of the ETH rate will depend on the expectations of traders and the news background in the industry.
The volume of ETH withdrawn from exchanges: reached a minimum in the last 20 months. Source – Glassnode
Nevertheless, a number of indicators also show positive signals in the crypto market. In particular, the number of transfers in the Ethereum system is starting to gradually recover: its current level is 48,339.72 transactions per hour (on average). This is the maximum level for the last month, i.e. business activity has passed its local minimum.
Average number of Ethereum transactions: growth in the last month. Source – Glassnode
Main stablecoin — Tether — uses the weakening of the positions of the main cryptocurrencies to increase its market capitalization. Many investors, fearing a further fall in the market, prefer to fix their positions by transferring part of their funds to stablecoins. According to CoinGecko, Tether’s market capitalization increased by 0.8% in a week to reach $79.2 billion.
Dynamics of the number of addresses by Tether storage time. Source – IntoTheBlock
The number of long-term holders of Tether is approaching the medium-term, confirming the low profitability of the crypto market as a whole, as well as the desire of investors to minimize their risks.
The structure of Tether holders by holding time. Source – IntoTheBlock
Key change in the structure of the TOP-10 cryptocurrencies — this is a moderate growth of the altcoin Avalanche (by 0.8%), which came to 9th place and displaced Dogecoin from the top ten. As Block-Chain24 notes, the launch of new inter-chain bridges has increased the demand for AVAX by moving some projects with Ethereum. Aside from Avalanche, only Ripple and Terra saw an increase in the value of their tokens for most of the week, but they also went into the red: by 3.2% and 6.8%, respectively.
Events in the crypto industry
- Binance rebranded its blockchain and token: to BNB Chain and Build N Build – RBC.
- Twitter has added an option to donate to Ethereum (donations in BTC and ETH are available today) – RBC.
- The New York Stock Exchange plans to provide a platform for NFT operations similar to the stock market – Bloomberg.
- UAE Authorities Introduce Licensing of Cryptocurrency Companies This Quarter — Bitcoin News.
- Rapper Snoop Dog has announced the launch of his musical works in the form of an NFT for the metaverses – CoinDesk.
- The FBI opens a new department to combat cybercrime using cryptocurrencies – Bitcoin News.
- The Bank of Russia has submitted a bill to ban the circulation of private cryptocurrencies in the country – RBC.
- The Verkhovna Rada of Ukraine adopted bill No. 3,637 on virtual assets, which legalizes cryptocurrencies and blockchain business in Ukraine — TSN.
This week, a number of experts came up with expectations of a rise in the price of bitcoin and the crypto market as a whole, which were not confirmed. Thus, Bloomberg analysts talked about the possible formation of an “inverted head and shoulders” pattern with the possibility of a rise in the price of bitcoin to $53,000. The author of the Stock-to-Flow model, known under the pseudonym PlanB, expected the growth of the crypto market against the backdrop of a low RSI value (below 30). However, tight regulatory policies and increased risks in the crypto market prevented the bulls from succeeding in storming the $45,000 level for BTC.
At the same time, many analysts hold more cautious – and even pessimistic – views regarding the dynamics of the crypto industry in the short term. For example, Glassnode experts believe that the level of uncertainty will only increase in the near future against the backdrop of geopolitical risks and the expected increase in the base rate by the US Federal Reserve in March this year. TomiEx crypto strategist Anzhey Kovalchuk admits the possibility of a decline in the price of bitcoin below $30,000 in the medium term against the backdrop of US monetary policy. Morgan Stanley experts express doubts about the stability of Ethereum as the main altcoin. They note the comparative advantages of Solana, Polkadot, Cardano and Tezos in terms of speed and low transaction costs.
Expectations for next week
On the monthly bitcoin chart, we see the formation of a “double top” pattern around $44,500.
Strong resistance and a double top on the monthly Bitcoin chart. Source – CoinGecko
This is a fairly strong bearish signal and, against the backdrop of existing macro-financial and regulatory risks, we can assume the following most likely scenario: after the Bitcoin price consolidates at the current level, there will be a new wave of decline in the region of $36,000–$37,000. The total capitalization of the crypto market will probably also decline , and the relative share of bitcoin will grow. The Ethereum exchange rate may decrease, but by a smaller percentage, given its strong correction in recent weeks. Of the TOP-5 cryptocurrencies, only Tether and USD Coin have a high chance of increasing their capitalization due to the massive reorientation to stablecoins in a falling market. At the same time, the segment of the metauniverses can show a certain growth, and its leader — Decentraland – should not be subject to a significant drop, unlike the crypto market as a whole.
Sources: CoinDesk, RBC, Bitcoin News, UBR, Bloomberg, IntoTheBlock, Glassnode, CoinGecko, CoinMarketCap, Block-Chain24, TSN
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.
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