We are now three weeks in from the massive 50% drop within one day, things seemed to have calmed down. Of course, COVID 19 is still a topic wherever you go, the US being behind Europe a few weeks seems to still have huge lines outside of grocery stores and panic has not reached its peak yet.
In this weeks report we will look at price correlation and see whether Bitcoin has decoupled, how the altcoins are doing (yes all though no one seems to be talking about them they still exist), how the sentiment towards crypto may currently be changing, and lastly looking at what on-chain activity is showing.
Correlation S&P 500, Gold, Bitcoin
Last week there was a brief chatter around whether maybe Bitcoin is already getting uncorrelated. What we can see from the chart is that indeed it looked like Bitcoin may be uncorrelated but rather than moving in different directions, instead it has been an indicator of where other assets seem to be going.
Thus the correlation is still very clearly there with Bitcoin some days being ahead of the other markets, other days moving the exact same way.
Now with correlation clearly still being here let’s look at some changes, we may be seeing within the total crypto market.
Total Crypto Market
The immediate thing that is recognizable is that volume has absolutely skyrocketed and is staying high even 21 days after the huge drop, the volume is still almost double as much as it was in December of 2019, and triple as much as it was in December of 2018. If we look at simple resistance levels we can also clearly see that we are fighting towards the resistance levels of the December 2019 lows.
So, high volume in the grand scheme of things is of course great news, especially considering we have seen the third biggest drop ever in Bitcoin people do not seem to be scared.
Where is the volume coming from?
If we take this volume into consideration and look at other statistics we can clearly see that this high volume isn’t only coming from people within the crypto ecosystem but also from new people joining.
Recently Coinbase reported the following numbers:
– 5x increase in cash and crypto deposits, totaling $1.3B
– 2x increase in new-user signups
– 3x increase in trading users
– 6x increase in total traded volume
Also, Jesse Powell founder of Kraken in an interview with Forbes mentioned that they have seen sign-ups, and people funding their accounts increase drastically.
Of course, considering the nascence of the industry having this increase in new users is great news.
A little side note to explain to you how small the crypto market is today.
Apple has $207.06 billion cash on hand, the total crypto market cap is $186 Billion.
Bitcoin and Altcoins
Since COVID 19 the US has announced unlimited quantitative easing, trillion-dollar stimulus packages and thus the talk of crypto is the digital gold narrative- Bitcoin. If we look at the numbers however nothing crazy out of the ordinary is happening if we look at the market dominance. When a large crash happens usually a lot of people flee out of altcoins and into Bitcoin, which has happened again. Going from the top of the market at a market dominance of 62% to the current market dominance of 66%. We actually saw a more aggressive dominance increase back in July when Bitcoin moved from $12k to $9k.
Thus in terms of the altcoins especially if you look at them with respect to their BTC prices the market drop hasn’t been much more significant than usual.
Will they continue to drop? This all depends on where the world markets are going. If people panic then certainly due to the volume and liquidity profile of most altcoins drops will become heavier in comparison to Bitcoin.
Sentiment and Onchain Metrics
Let’s take a look at some on-chain metrics and the fear & greed index to look at how the current crypto ecosystem is viewing the current market situation.
Of course, after a drop like we had, the fear and greed index is at very low levels. The fear and greed index is of course only valuable for a longer-term investor that believes in Bitcoin, for those that are looking to deploy further capital it gives a good signal.
Simply put showing price sold/price paid- If SOPR is <1 more Bitcoins are at a loss than at a profit.
We can see here that we were well below 1 and almost reached the 0.94 level reached in the November 2018 lows. With the large 70% increase in Bitcoin price, we are now closer to the 1 level again.
Showing that it could be that the capitulation was strong enough for the bottom to be in.
Bitcoin- Hodler Net Position Change
Simply put showing monthly position change of long term investors/holders whether their wallets increased or decreased.
Here we can see that there is nothing out of the ordinary on a longer time frame, the hodlers/long term investors are currently accumulating.
To conclude this week’s report I think it is clear that macroeconomically the reason for Bitcoin is stronger than ever, and thus the reaccumulation phase has started. We are seeing a huge unemployment rate increase, economic collapses and due to this a recurring increase in interest in Bitcoin. Cryptocurrencies have seen such volatility on a regular basis and thus we shouldn’t be too phased, what is happening in the world economy is much crazier if you look at it historically.
The narrative for Bitcoin is only getting stronger and the time for Bitcoin to show and succeed is now.
Written by Alex- Co-founder Accointing
Feel free to reach out to me: email@example.com