08 Aug 2022

Renewed crypto market optimism as the Ethereum merge nears

The crypto market continues its recovery process after the dreadful start to the summer. While altcoins keep rallying, bitcoin has established a solid consolidation range in the $22,500 to $24,500 area and is up 2% over the past seven days.
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Market sentiment has improved and is at the highest level since April, as measured by the Fear and Greed Index. This renewed risk appetite has led altcoins to outperform bitcoin. BNB has increased 14% over the past seven days, while ETH is up 8%.Part of the market sentiment improvement might be caused by hopefulness regarding Ethereum’s upcoming merge.
Source: Tradingview (Coinbase, Binance US)
With crypto prices slowly grinding upwards, volatility has been low lately. Wednesday’s release of the July CPI numbers might be a catalyst for increased volatility.The crypto rally started with the larger coins around two weeks ago, but now traders have moved to smaller ones. Of the top 50 coins by market cap, Flow is the best performer with a 47% gain, followed by NEAR, which increased by 24%.
Source: CoinGecko,
Traders rotating from bitcoin and stablecoins to altcoins
All indexes have seen positive returns in August, with the Small Cap Index leading the pack with a 9% increase. Mid Caps (+7%) and Large Caps (+5%) follow closely behind, while bitcoin (+2%) has seen the least gains.
Source: Bletchley Indexes, Tradingview (Coinbase)
With bitcoin underperforming relative to altcoins, the bitcoin dominance has plummeted from a peak of 47% in the middle of June to 40.5% now. As the market sentiment has improved, traders have been more interested in getting exposure to altcoins than bitcoin.Most notably, we see ETH increasing its market share by 0.89 percentage points over the past seven days, while BTC’s market share is down 0.96 percentage points.As the market has gotten hungrier for risk, we also see the market shares of stablecoins plummeting. Since the middle of June, USDT’s market share has fallen from 8.1% to 5.9%.
Source: CoinMarketCap
Market participants don’t want to declare a bull market yet
The Fear and Greed Index sits at 42 – the highest since April. The market sentiment has been steadily improving since the bottom in the middle of June. Even after this market sentiment improvement, the Fear and Greed Index still hasn't climbed out of the fearful territory. In addition, the slow growth of the index indicates an inherent fear among market participants that the crypto market's recent rebound could be short-lived.
Bitcoin’s spot volumes are declining after the July surge
The bitcoin spot volume is on the way down after reaching close to one-year highs in July. Binance is still the venue for almost 80% of spot trading activity, as the exchange behemoth’s fee removal for several BTC pairs one month ago successfully helped it eat up even more of the bitcoin spot market. Trading activity remains muted across all other venues.
Source: Skew, Tradingview (Binance, Binance US, Bitfinex)
Bitcoin’s 7-day volatility falling towards a yearly low
Bitcoin has been remarkably stable over the past seven days, hovering between $22,500 and $24,000. This price stability has caused bitcoin’s 7-day volatility to fall to 1.8% - among the lowest in one year. Over the past seven days, there have been no fundamental catalysts for price movements. Could Wednesday’s release of the July CPI be the catalyst for higher volatility?
Source: Tradingview (Coinbase)
This was our spot market update, but lots are happening in the derivatives markets as well! Click here to read our weekly crypto derivatives update.
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