Market trap?

The market loses 45,000 USD Bitcoin. This is the benchmark news this week. We have always considered this level as strategic, capable of changing investor sentiment, and so it is proving.

We see how the loss of this level has caused Bitcoin to enter again into a dynamic of indecision. We are therefore back to an uncertain scenario, and we must bear in mind that we have already closed the first quarter of this 2022. It seems clear that this is going to be a complicated year for cryptoassets.

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Bitcoin can easily look for support zones in the area of 41,000 USD, coinciding with the bullish trendline originating from the lows of January 24 of this year, the yearly low.

Ethereum adds volatility

Undoubtedly the chart of the second major crypto-asset shows us more volatility. Especially in this last period we see how the rise of ETH has been quite more direct reaching above the area of 3,500 USD. The correction has been more or less of the same magnitude, around 10%.

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Macro data gives us the answer

Followers of these posts will know the importance we place on macro market data. They are a very useful tool for interpreting the movements that occur. The cryptoasset market is highly concentrated, and the importance and influence of this data at the market level is enormous

In a market with so much dominance, macro data gives very important information to establish trends.

One of the tools we have available, thanks to the fact that the data in Blockchain is public, is the ATH of each of the assets that make up the cryptoasset market. Based on that we make a weighted calculation of the historical maximum of the market, and from this information we can obtain a metric that expresses what proportion of that ATH is contained in the price of the assets at the moment. This is what we call PCTATH

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Naturally, this dominance is reflected in the similarity of the movement in the indicator and in the Bitcoin chart, and clearly shows us the importance of the 60-point zone, which would correspond approximately to the 42,000 – 43,000 USD in the case of the most capitalized cryptocurrency.

Overcoming and consolidating those 60 points is an important turning point in market dynamics, and what we have seen these days is nothing more than a rejection of this zone, which from the indicator’s point of view, is within normal volatility levels and therefore, does not change the long-term bullish bias we had until this moment.

Change of scenery in the options market

Also hugely significant is what we are seeing in the options market, especially in the Put/Call ratio. This ratio, which measures the relationship between open put and call option positions, has seen a shift between Bitcoin and Ethereum, with the latter having a higher ratio than the former.

High values of this indicator are usually associated with possible declines in the market, so the context would suggest at this time more pronounced declines in Ethereum.

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Although we have to add that the fact that we see a considerable reduction in the spread between Bitcoin and Ethereum ratios invites optimism. The chart clearly shows that when this spread has been the widest, that is when we have seen the market declines

Futures market settlements balance out

The futures market has also shown a repositioning with an increase in the closing of long positions, which has added pressure to the market on the demand side.

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All these data give us vital information to interpret the movements of the different assets in the market. 

Recovery in TVL data

Another data that we consider important is the locked-in capital or TVL data in the DeFi protocols. The last few weeks have been marked by significant advances in a clear recovery from previous levels.

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It should be noted that the values may vary depending on the source we consult, but the trend does give us reliable information. In that sense we see how we have recovered the levels of the end of the year 2021. Blocking capital in protocols in times of uncertainty generates a return decorrelated to the evolution of prices, so this increase may conflict at certain times, if it coincides with bull markets.

Markets reposition themselves

It is clear that we are seeing a new market recomposition after a spectacular start to the second quarter. The dynamics of the year had not been positive up to this point, but had changed in the last few days. We will now see the depth and scope of this movement.

For this we will keep waiting and checking at all times if the Bitcoin price pierces this lower range of the support zone represented by the 45,000 USD at the top.

Always DYOR