An Analysis of the Current State of the Crypto Market

An Analysis of the Current State of the Crypto Market

In a recent analysis by ETC Group’s Head of Research, Andre Dragosh, the current state of the crypto market was examined in great detail. The findings revealed that crypto assets have demonstrated their resilience by outperforming traditional assets such as equities. This outperformance was driven by a significant repricing in monetary policy expectations and short futures liquidations. However, it is important to note that this outperformance faced limitations in the short term due to stronger-than-expected US jobs data, which resulted in a decrease in overall risk appetite across traditional financial markets.

Altcoin Outperformance and High-Risk Appetite

During the analyzed period, altcoin outperformance gained momentum, with certain cryptocurrencies like Avalanche (AVAX) and Cardano (ADA) returning over 50% each. This surge in altcoin outperformance compared to Bitcoin (BTC) is seen as an indication of a “high-risk appetite” within the crypto market. It is noteworthy that among the top 10 crypto assets, Avalanche, Cardano, and Polkadot (DOT) stood out as the relative outperformers.

On-chain data for Bitcoin suggests that investors are increasingly taking profits, as evidenced by the rising number of coins in profit being sent to exchanges. ETC Group’s in-house Crypto Asset Sentiment Index remained relatively elevated, indicating positive market sentiment. However, major reversals to the downside were observed in the Crypto Dispersion Index and the BTC 25-delta 1-month option skew.

The Crypto Fear & Greed Index remains in “Greed” territory, reflecting ongoing market optimism. ETC Group’s Cross Asset Risk Appetite (CARA) measure, while slightly declining, remained in positive territory. This indicates a decrease in risk appetite in traditional financial markets. Although the performance dispersion among digital assets decreased, correlations among crypto assets have also decreased. This emphasizes the importance of diversification among digital assets and suggests that investments are driven by coin-specific factors.

The market continues to be in a strong profit environment, with a significant percentage of BTC and ETH addresses in profit. However, profit-taking activity, especially among short-term holders, has increased as Bitcoin approaches recent highs. This has led to higher selling pressure. Additionally, long-term holders have been transferring profitable coins to exchanges, potentially hindering short-term price increases. It is important to note that there is no evidence of older coins being spent, which would indicate a larger price correction.

Aggregate open interest in BTC futures and perpetual remained stable, with notable futures short liquidations recorded. However, BTC option open interest saw a significant increase, accompanied by relative put-buying and an increase in the put-call open interest ratio. The 25-delta BTC option skews also increased, indicating higher demand for puts compared to calls. However, overall at-the-money (ATM) implied volatilities did not change significantly.

At the time of writing, BTC has lost its $42,000 support line and is trading at $41,600. This represents a 5% decrease in the last 24 hours.

The analysis of the current state of the crypto market reveals the resilience of crypto assets and their outperformance compared to traditional assets. However, limitations arose due to stronger-than-expected US jobs data, resulting in a decrease in overall risk appetite. Altcoins have shown impressive performance, indicating a high-risk appetite within the crypto market. Profit-taking activity has increased, and investor sentiment remains relatively positive. Diversification among digital assets is essential as performance dispersion decreases. Selling pressure has intensified, primarily driven by short-term holders and long-term holders transferring profitable coins to exchanges. BTC futures and options market trends demonstrate stability with notable changes in open interest and demand for puts. Overall, while the market remains optimistic, recent developments indicate potential challenges and fluctuations in the crypto market.


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