The cryptocurrency market opened the week in a weaker mood. Bitcoin is retreating from major resistance levels at $28,000, the US dollar is gaining and Wall Street index futures are trading under pressure again. Thus, we are seeing the retreat of some bullish positions from risky assets after Friday's rally. Although BTC has shown in recent months that it 'does not fully mimic' the behavior of the broader market (when yields rose to multi-year highs, Bitcoin continued to consolidate in a sideways trend) - risk aversion backed by concerns about the oil market in the face of potential escalation in the Middle East does not appear to be a positive for cryptocurrencies.
- Investment bank Jefferies maintains a positive view of Bitcoin's future - it has identified Bitcoin as an asset that can be used to reduce risks associated with the currency system while paying a risk premium if inflation returns
- Bank of America indicates that oversold levels in U.S. Treasury bonds suggest that markets are approaching a spike in volatility. A similar oversold level for 10-year U.S. bonds to the current one occurred in the first quarter of 2021 - Bitcoin at the time recorded a rally to $60,000 followed by a sharp decline.
- Glassnode, in its latest analysis, recognized a systemic risk to the AAVE lending protocol, where leveraged trading of stETH and wETH tokens (ETH derivatives, related to the transition of cryptocurrencies to Proof of Stake) is growing in popularity
- Aave uses approx. 14.4% of stETH and 25.3% of wsETH resources. On-chain analysts have pointed out the risk of a potential salvage of sETH coverage in ETH which, under extreme market conditions which could lead to debt service problems in Aave and a depreciation of the cryptocurrency.
Bitcoin, Ethereum and Aave charts
The price of BITCOIN has reached major resistance, in the vicinity of $28,000 where we see the SMA200 on the D1 interval (red line), further supported by the 23.6 Fibonacci retracement of the upward wave from the fall of 2022. If this level is not exceeded, we can expect a correction towards $25,500 (38.2 Fibo). On the other hand, if demand shows strength - a rise above this level could herald the crossing of the spychological barrier of $30,000.
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Looking at the chart of the dollar index (USDIDX) to Bitcoin (gold chart) we see a divergence - the dollar is gaining at the beginning of the new week supported by general uncertainty - including geopolitical, which puts pressure on Bitcoin. Importantly, however, Bitcoin halted Friday's post-NFP declines near $27,000 - where we can also look for an important support level.
Source: xStation5
The second largest of the cryptocurrencies, Ethereum is performing noticeably weaker against Bitcoin and has not even approached the 23.6 Fibo retracement of the November 2022 upward wave at $1,850. What's more, the bulls are clearly struggling to break through $1650 (38.2 Fibo) - a perfect illustration of the weakness of all smaller cryptocurrencies against Bitcoin, which is usually the best performing of the cryptocurrencies, during periods of broader uncertainty. JP Morgan analysts in a recent commentary pointed out the risk of overcentralization of the Ethereum network after the successful 2022 'Merge', when the cryptocurrency switched to the Proof of Stake (PoS)-a method of approving tranasactions without the involvement of miners, who until recently 'created' the network in a manner similar to Bitcoin's Proof of Work (PoW).
Source: xStation5
On the chart of the AAVE cryptocurrency, we see a bearish double peak formation at the $72 level.
Source: xStation5
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