As idiosyncratic risk related to contagion effects has calmed down, the crypto market is now back to eyeballing the decisions of the Fed. In Wednesday’s FOMC meeting, the FED will decide how to deal with the ever-rising CPI numbers, which exceeded expectations at 9.1% for June. The market expects the Fed to increase its funds rate by 75bps.

As idiosyncratic risk related to contagion effects has calmed down, the crypto market is now back to eyeballing the decisions of the Fed. In Wednesday’s FOMC meeting, the FED will decide how to deal with the ever-rising CPI numbers, which exceeded expectations at 9.1% for June. The market expects the Fed to increase its funds rate by 75bps.

Arguably, last week’s most significant happening in the crypto market was Tesla announcing that they sold 75% of their bitcoin holdings in the second quarter. The bitcoin price barely reacted to the news, indicating that Elon Musk’s price-driving powers have weakened from 2021.

During the past seven days, we have seen price declines for all the top 50 cryptocurrencies by market cap. Most of these coins have seen between -0% and -10% price movements during this period. This has led to significant increases in the market dominance of stablecoins.

The bitcoin dominance increases as market conditions sour

Amidst ether’s recent price depreciation, bitcoin has seen its dominance increase—a natural rotation as traders seek safety in a falling market.

Although the Mid Cap index has fallen by 9% over the past 7-days, the index remains the best performer in July with a 27% increase.

In comparison, Large Caps are down 8%, while Small Caps have fallen 10% over the past seven days.

Ether’s lack of strength relative to bitcoin has caused its market dominance to fall 0.34% over the last week. On the other hand, Bitcoin has seen its market share increase by 0.47%. This is a natural rotation as markets fall, given that investors perceive bitcoin as a lower-risk asset than ether.

Stablecoins lost ground last week but have since rebounded. This rebound has been led by USDT and USDC, in which market shares gained 0.33% and 0.31%, respectively. The increase in stablecoin dominance is most likely caused by traders seeking to mitigate volatility risk.

In a recently published report, we examine how Arcane’s stablecoin predictions for 2022 have turned out so far. Click here to read.

The Fear and Greed Index still signals a nervous market

The Fear and Greed Index briefly hit a high of 34 last week as the strong recovery in the crypto market spurred increased optimism among investors. The index has since fallen and is barely hanging above ‘extreme fear’, indicating that market participants fear the recent market recovery was just a fakeout. The market sentiment has definitely improved from the June lows but still signals nervousness among market participants.

The bitcoin spot volume on Binance stays elevated

We have seen elevated bitcoin spot volumes in the past couple of weeks. As noted in our two previous reports, the high volumes are caused by wash trading on Binance, which emerged when the exchange introduced zero fees for several BTC pairs. Binance has since attempted to reduce the amount of wash trading but has been unsuccessful so far. Other exchanges have seen depleted spot volumes recently, showcased by Binance making up 75% of spot volumes.

30-day volatility hit the lowest level since May

As Bitcoins’ price has declined over the past week, the 30-day volatility has fallen to 3.1%—a level we’ve not seen since the beginning of May. Thus, it sits slightly below the 3.6% average volatility for 2022 as the negative news flow has decelerated. Although we have seen a few days with significant negative returns, most days have delivered returns close to zero.