Cryptocurrencies have been weakening since the beginning of the week. Supply pushed Bitcoin and Ethereum prices south although both major projects managed to break the psychological boundary and climb above $25,000 and $2,000. Today Bitcoin costs $24,000, the bulls have been fighting the sellers for 2 days for further increases. Ethereum is slipping nearly 10% from its highs and costs $1880. Is the observed deceleration in growth just another stop in the climb of digital assets or a harbinger of the return of risk aversion?
- Investment fund BlackRock has opened a trust buying Bitcoin from the markets on behalf of institutional investors. In addition, BlackRock CEO Larry Fink pointed out in an interview that interest in Bitcoin is huge, with the cryptocurrency market still narrow and young (just over $1 trillion in capitalization versus over $8 trillion in assets BlackRock manages). Fink cited that search results for Bitcoin on BlackRock are several hundred thousand versus a few thousand for phrases related to Covid or the Fed. The creation of a spot fund for institutions is BlackRock's next big step into cryptocurrencies after cryptocurrency exchange Coinbase recently signed a deal with the fund. Gaining 'attention and popilarity' among investors could potentially prove to be a solid foundation for building the next crypto market bull market;
- The Ethereum blockchain difficulty bomb, according to data from Wenmerge, will explode on September 13, i.e. in about 27 days, dramatically reducing the supply of the cryptocurrency. The market was circulated with news of the transfer of nearly 145,000 ETH by one of the whale addresses, which became active less than a month before 'The Merge' after three years of inactivity. The transfer of such a large number of Ether may suggest that the whale will want to make token sales or, on the contrary, intends to become one of the network's validators and earn passive income from its tokens;
- Blockchain Cardano according to its creator, Charles Hoskinson, is just before the implementation of the Vasil hard fork, which will improve the scalability of the network and 'unlock' opportunities for decentralized applications built on the network. Cardano has been the second most active blockchain after Bitcoin for some time, yesterday clearing more than $7.4 billion in transactions against Bitcoin's $13.41 billion in chains. However, this is still not reflected in the token's price, which has been consolidating between $0.51 and $0.58 for quite some time. More than 1,000 decentralized projects have already been built in the Cardano ecosystem;
- Cryptocurrencies are becoming increasingly risky as their prices rise. While investors' hopes for a Fed pivot remain in play, and U.S. inflation may have peaked, markets are still unsure of the scenario that is playing out. Uncertainty is fueled by the approaching fall/winter season, weakness in China's economy and geopolitical tensions. All this means that supply may still be active and retreat from the market after 'relief rallies'. Traditionally, Michael Burry, a manager at Scion Capital, which gained popularity by earning hundreds of millions of dollars from the 2008-2009 sub-prime crisis, forecasts such a scenario for the indices with which cryptocurrencies correlate.
Bitcoin supply of cryptocurrency exchanges is still in an uptrend, having started as recently as March 2020. Investor demand for bonds is one of the reasons for the continued trend this year in which capital migrated away from risky assets to the 'safe haven'. Exchanges saw an outflow of nearly 100,000 bitcoin in May when Luna collapsed. This represents a more than 3.2% increase in total outflows since the March 2020 ATH. Source: Glassnode
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Open account Try demo Download mobile app Download mobile appLong-term investors have traditionally tended to have more confidence in the potential of the assets they hold. Glassnode grants long-term investor status to addresses that do not sell for a minimum of 155 days, which takes us back to March 2022 and the unwinding that then resulted in a rally to the $46,000 area. From the November 2021 ATH, LTH Supply points to 13.56 to about 13.27 million BTC, with a drop of only 300,000 BTC until the collapse of Luna, when another 150,000 BTC was sold by long-term addresses as a result of widespread fear in the market. Recent spending by LTH addresses is volumetrically higher than the period before the collapse of Luna, indicating a lack of desire to sell Bitcoin among long-term investors. Source: Glassnode
Today we see that the active supply chart is below the May 2022 ATH (around 65%). It shows that the conviction of buyers in May and July, following the migration of miners from China, is high in 2021. Stored by long-term addresses, Bitcoins are balancing supply, which confirms that the major cryptocurrency is recovering in a slump. Source: Glassnode
We can see the scale of the chart's volatility 'smile' looks different for September and different for October as the 'post Merge' period. The chart indicates lower demand in the Ethereum options market after the move to Proof of Stake i.e. the aforementioned 'Merge' event to be held on September 15. Equally importantly, the market expects higher volatility after the event, which confirms that investors are worried about the 'buy the rumors, sell the facts' scenario and are hedging against dips. It is worth noting, however, that the charts are built on the basis of currently available data, and institutional demand for Ether could turn the game around. Source: Glassnode
Ethereum chart, D1 interval. The 200-session moving average on the daily interval could still provide significant resistance for bulls. The SMA 200 currently runs around $2250, demand may reach these levels before 'The Merge' to try to turn back the ETH downtrend. Previously, the average determined another cascading Ethereum sell-off, when the token's price bounced off $3500 in April. Source: xStation5
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