Follow the leader BTC

We are seeing an important change of scenery this week in the cryptoassets market. It is really noticeable the entry of bullish capital that in an important way has ended up boosting the market.

Macro data

Beyond what we may see with BTC and ETH, the entire market has changed bias or sentiment. One of the tools we use to track the evolution of the cryptoasset market is an index made up of the 250 most capitalized assets 

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With this tool we can clearly see how the market has moved from a clearly bearish disposition to a bullish context.

We have also seen this dynamic in the CVI or Crypto Volatility Index

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The risk indicator shows a clear trend in range, which coinciding with a price rise indicates that the market is discounting that the rise can continue without increasing the perception of risk.

Keeping an eye on the news

Inflation and interest rates

Despite this bullish context, we cannot ignore the latest correction in the market on the same day that it was made public that the US CPI exceeded 7% in a global context of uncontrolled inflation.

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This data may seem foreign to the context of the cryptoasset market, but the Bitcoin chart clearly shows us otherwise. Every time we have seen an intervention from the Federal Reserve talking about monetary policy it has had an immediate effect on the cryptoasset ecosystem. This is surely due to two main reasons:

  • A data point like inflation has a direct affect on the entire economy. One of the main reasons is that investors have less capital available, as they need a larger portion of their income to cover regular expenditures.
  • Markets are discounting the implementation of economic contraction measures by central banks to try to reduce inflation.

This gives us a clear scenario in which cryptoassets are closely related to traditional assets and therefore the Fed will be setting the pace.

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Rusia vs Ucrania

El estallido de un posible conflicto de esta magnitud preocupa a los inversores, y no es para menos. Hay que estar atentos a la evolución de la situación geopolítica por que podría producir mucha volatilidad inicial. Como siempre este tipo de situaciones provocan un impacto inicial que es absorbido por los mercados que puede ser muy distinto a la reacción posterior a medio y largo plazo

Materias primas

Directamente relacionado con la situación anterior, las materias primas (principalmente las energéticas) son las causantes principales de esta alza generalizada de precios, junto con los fletes de transporte.

Respecto a la energía, especial atención a las afectaciones geopolíticas sobre el precio del Gas Natural, que es la materia prima que ha retomado la tendencia alcista de forma clara

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The rest, especially materials for heavy industry, have continued to show upward pressure, but more mildly. It should be borne in mind that the increase in the price of these materials is now beginning to be felt more clearly by the consumer, because suppliers are slow to pass it on in the price, and because previous stocks have already been consumed.

Talking about cryptoassets

I hope you don’t think that we haven’t talked about cryptoassets for now, because I don’t think that’s true.

The economy is closely related and some assets have a direct influence on others for various reasons.

Whenever we talk about market operations, the concept of diversification appears, and more specifically, de-correlation.

Decorrelation is a mathematical concept that indicates the behavior of one asset with respect to another, and serves to identify assets with opposite behaviors that help us to compensate our portfolios. 

This is a good approach, but in practice it does not work as well as in theory. Despite what the statistics may tell us, there are certain situations in which the behavior of assets is exactly the same, albeit temporarily.

So, if you think we haven’t talked about cryptoassets, you’re wrong. We have talked about the market, and have no doubt that if a relevant and unexpected event is triggered, the contagion to cryptoassets (in the short term) is guaranteed.

Ehtereum injects optimism

These reflections only invite to be attentive to the movements in all markets, but it is well true that the situation of cryptoassets is much better in recent days. A clear example can be seen in the chart of ETH

ETH is now clearly positioned to try to pierce the resistance zone marked by that bearish guideline (remember that unlike Bitcoin, Ethereum is not yet in a clear bullish disposition as it is below that zone).

Now we could have a movement of perforation of this level that could quickly lead us to the level of 4,000 USD which for me, is the real turning point.

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The market is giving us messages of a change of scenario. It seems that the important falls are behind us, although we know that there is always a margin of possibility of relapse, depending on the context and external factors in many occasions.

But if the latter respect the current trend, we may find ourselves in an interesting situation in the coming days with a clear buying dynamic in cryptoasset traders.

The bullish volume has appeared, and we are seeing news concerning adoption (BlackRock, Central Bank of Russia…) that can give the final push. So keep an eye on the screens, especially this weekend when volume will be reduced, taking into account the current intraday scenario of contraction.

But what we can say today is that the market has overcome a new phase of recession, that it is about to come out of it, and that despite the bad forecasts… it is still very much alive and is becoming an increasingly important player in the economy.