Bitcoin’s Profit Taking and Consolidation Gives Bears Opportunity to Take Control
The total crypto market cap hit its highest close in three months on April 3 at $2.23 trillion, but the performance between March 28 and April 4 was just a 1.9 gain. %. Meanwhile, Bitcoin (BTC) posted a negative performance of 2.6%, although this was more than offset by gains in altcoins.
While Ether (ETH) and Binance Coin (BNB) have gained less than 3% over the past seven days, a handful of mid-cap altcoins have managed to gain 20% or more.
On April 1, the difficulty of the Bitcoin network hit an all-time high of 28.587 trillion. The indicator correlates with the computing power required to mine BTC blocks, currently at an estimated hash rate of 201.8 exahash per second (EH/s).
However, on the same day, the United States Securities and Exchange Commission officially disapproved the ARK 21Shares Bitcoin exchange-traded fund (ETF) application. The regulator argued that the Cboe BZX Exchange had failed to meet the requirements for listing a financial product under its Rules of Practice as well as those of the Exchange Act.
Comparing winners and losers gives skewed results because the first 3 coins had a slightly negative impact.
Zilliqa (ZIL) rose 56% after announcing it would launch a metaverse platform as a service in April. According to a press release, Zilliqa’s Metapolis is built using real-time Nvidia Omniverse 3D. Nvidia is a Nasdaq-listed producer of graphics processing units (GPUs) worth $684 billion.
Aave (AAVE) gained 38% after the release of Aave v3, announced on March 16. The new features were aimed at providing greater capital efficiency, increased security, and cross-chain functionality. The non-custodial liquidity protocol allows users to lend, borrow or stake their assets to earn a return on their holdings.
Synthetix (SNX) rose 28% after its debt pool synthesis rollout was scheduled for April 7. Currently, the decentralized finance protocol runs debt pools on two Ethereum chains: the mainnet and the layer 2 scaling solution Optimism. By switching to a “native Optimism protocol”, the application will merge its pools to maximize liquidity.
Apecoin (APE) faced a natural correction after a 60% gain between March 21-28 as the company behind it raised $450 million in a funding round led by Andreessen Horowitz. Yuga Labs, the creator of the Bored Ape Yacht Club (BAYC), launched APE as a governance and utility token that allows its holders to oversee and manage the so-called ApeCoin DAO.
Prime Tether shows slight discomfort
The OKX Tether (USDT) premium is a good indicator of demand for crypto from China-based retail traders. It measures the difference between peer-to-peer transactions based in China and the US dollar.
Excessive buying demand tends to pressure the indicator above the 100% fair value, and during bear markets the market supply of Tether is flooded and results in a discount of 4% or more .
Tether hit 99.2% on April 2, its lowest level since January 26. Although this is a far cry from retail panic selling, the indicator has shown a slight deterioration over the past week.
The lack of retail demand is not particularly concerning, even though the total cryptocurrency market capitalization has exceeded $2 trillion and the indicator is down 19% since December 2021.
Futures markets show mixed sentiment
Perpetual contracts currently reflect mixed sentiment. As shown below, the seven-day cumulative funding rate is slightly positive for Bitcoin, Ether, Solana, and XRP. This data indicates higher demand from longs (buyers), but it is far from excessive. For example, Solana’s positive weekly rate of 0.20% equals 0.8% per month, which shouldn’t be a concern for most futures traders.
On the other hand, Terra (LUNA) showed a bit more demand from shorts (sellers) and the absence of Tether demand in Asia signals a lack of confidence from traders.
Total market capitalization rose 26% in three weeks, from $1.67 trillion to $2.1 trillion on April 4. Yet derivatives indicators show no sign of improvement, leading to a lack of investor confidence. Until sentiment improves, the likelihood of a negative price correction remains high.
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