Discounted risks and valuing expectations …

This is the phrase that best defines the cryptoasset market this week. It is clear that we are riding a roller coaster, albeit with controlled volatility.

Bitcoin leads the way for the cryptoasset market

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The analysis of the BTC chart is descriptive in this aspect, with a clearly bullish structure and a test of the important 45,000 zone. The market has evolved in a logical and coherent way with the situation developing a relatively optimistic scenario that fits our forecasts.

This fact closely marks the market sentiment that we can appreciate in investors, who seem to be more inclined at this stage of the market for BTC than for ETH, as was the case a few weeks ago.

Put Call Ratio of crypto options
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This is a very interesting ratio that allows us to analyze the market sentiment and above all the risk perception of investors based on the actions they take. The ratio between put and call options on BTC and ETH is having a disparate behavior lately. 

In previous periods we can see perfectly well how the norm is that these ratios referring to BTC and ETH have a strong correlation. This joint behavior is broken at the beginning of 2022 with a strong optimism about ETH, which makes derivatives on this asset show a significant decline in the ratio of selling intentions to buying intentions.

The opposite is true if we analyze the positions with respect to BTC. In this case the perception was of a considerable increase in these positions expressing a clear short sentiment.

Naturally these episodes occur in the market, but they are short-lived and limited in scope. And in this case the change of trend was caused by BTC significantly reducing the open positions in sales compared to purchases, while ETH was doing the opposite.

Despite an earlier bias, the current market trend is to overweight BTC over ETH.

As we commented, the trend gives us a clear diagnosis at the moment, which is that the market preference is swinging back towards BTC to the detriment of ETH. The same can be seen in the dominance charts 

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The turnaround is perfectly observable if we zoom in on the last period of time.

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The market waits patiently

When we enter the realm of speculation there is a wide margin for error. The interpretation of data is often the most difficult and complex part of the investment decision-making process.

Cryptoassets offer us a huge advantage over other types of assets from the point of view of access to market information that is free and public. Another thing is to have the capacity and tools for the correct interpretation of the data. 

Even at the risk of making mistakes, it is too valuable information to work with. 

A key point in the dynamics of the cryptoasset market is the traffic at the points of purchase: the exchanges. The inflows and outflows give us interpretable information about the market sentiment.

About this, I want you to pay attention to the charts I am going to discuss:

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It is not so important to have access to a large volume of market information, but rather to have the ability to interpret it correctly or with the minimum possible margin of error.

This should be our objective when processing the information we obtain, and this requires a correct reading of the data. The above graphs correspond to a very interesting concept of market analysis: the velocity of assets.

Specifically, we can see how the average change of balances in the exchanges’ balance sheets of a specific asset evolves over a 7-day period.

The conclusion is that the flow of capital to the exchanges is increasing and this puts into question a strong upward momentum for the moment.

Volatility models: We are still in a pessimistic scenario.

Meanwhile, according to market volatility, we are still in times of recovery and modest revaluations. The market has not yet recovered and it is clear that the macro situation is not helping at all, at least in the short term. But be careful, because everything seems to indicate that we are immersed in a paradigm shift and the concept and perception of cryptoassets could be one of the fundamental factors in this change.

A change in that perception appreciating the advantages of cryptoassets could trigger a series of market movements that will cause a change in the current sentiment.

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It should be noted that these models refer exclusively to volatility and cannot be used in isolation, but are another indicator of market performance.

The use of valuation models in isolation tends to give a distorted view of the market.

We must enrich our analysis with other perspectives that add other nuances.

Market snapshot by sector

This weekly period has been defined by marked rises distributed in a fairly proportional manner.

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The most important increases came from the Cosmos and Terra ecosystems in terms of capitalization, with a percentage increase of more than 30%. The sectors in negative territory during this period were a clear minority.

Conclusion: The market is still in a recovery dynamic, but without massive capital inflow.

We can see how the market does not lose those bullish signs that have characterized it in recent weeks, but nevertheless does not show a clear upward trend. It does not have the necessary muscle to definitively break the bearish trend lines that would define a new trend capable of setting new ATHs.

Even so, the diagnosis remains positive and in a wait-and-see position, as are most traders.

Always DYOR