Table of Contents
Market
picture
Bitcoin went
below 15,500 at the end of the day on Monday, rewriting two-year lows, and
slightly retreated from those extremes by the start of trading in Europe,
trading around 15,700 (-2% in 24 hours). Ethereum is updating lows from July at
the time of writing, falling to $1072 (+3.5% in 24 hours).
The crypto
market capitalisation is down 1.75% overnight to $782bn, its lowest since
January 2021. Although this indicator is very tentative and synthetic, we have
seen a tug-of-war around $1 trillion for a long time. For a while, the market
lingered near levels just above 830 – the high at the peak in January 2018. Now
another belief that the previous peak of the last cycle would work as
insurmountable support has been broken.
The crypto
market capitalisation has gone sharply down, failing to develop an offensive
above its 200-week average by early November. The 200-week (4-year) period is
consistent with the notion of cycles in crypto, and the situation now looks
like the exit of leveraged speculators who thought crypto had bottomed out in
June-October.
Although we
believe that squeezing the weak hands out of the sector is almost complete, we
are now seeing nothing more than speculators deleveraging, which is generally
healing the market. Technical analysis suggests capitalisation could fall as
much as 400-450bn, nullifying the rally, before returning to growth. However,
this technical picture looks excessively pessimistic, and the stingiest
speculators might not wait for that entry point, as is often the case in the
markets.
News
background
According to
CoinShares, investments in cryptocurrencies rose by $44m last week against
inflows of $42m the week before. Bitcoin investments rose by $14m, while
Ethereum fell by $1m. Investments in funds that allow shorts on bitcoin
increased by $18m, while shorts on ETH increased by a record $14m. Inflows to
“short” products were 75% of the total, suggesting a deeply negative
sentiment amid the FTX collapse, CoinShares noted.
According to
IntoTheBlock, the share of unprofitable bitcoin addresses exceeded 51% (24.56
million addresses out of 47.85 million BTC holders). The last time a similar
situation was observed was after the market crash in March 2020.
Rumours have
emerged in the cryptocurrency community about possible problems at another
major company. The failure of digital asset manager Grayscale Investments to
disclose reserves and the suspension of crypto lending operations by OTC
platform Genesis Trading have raised concerns about the entire Digital Currency
Group (DCG) sustainability. According to experts, the collapse of Grayscale
would be more severe than the collapse of Three Arrows Capital.
This article was
written by FxPro’s Senior Market Analyst
Alex Kuptsikevich.
