No forces in the market

It is difficult to analyze this week and find something outstanding to include in this post. A dull week, with a lack of incentives to trade in the market and with declining volume. This paints a complex scenario in terms of designing scenarios with an acceptable statistical probability of success.

But once again, this is the market and with this we have to work

Watch out for bitcoin dominance

Without a doubt, one of the most striking data that we can analyze is the dominance of bitcoin. Dominance, understood as the weight or capitalization ratio of an asset over the entire market, is a very interesting and reference data, especially when we find ourselves in a scenario such as the crypto asset market, where 40 % of the capitalization is concentrated in only one

No alt text provided for this image

This is a fundamental fact, and what surely gives it such important weight. We have different ways of working with dominance. In fact, we are developing different indicators in this regard.

But in this case we are going to talk about a very important piece of information and where this ratio is especially relevant. And this is related to the differential status that an asset such as bitcoin has within the ecosystem of digital assets: that of a safe haven asset.

It may not be a safe haven asset to use, (speaking from a tradFi point of view), but it is true that the facts show that in situations of uncertainty, the market demands more bitcoin.

This transfer of capital from other digital assets to bitcoin is reflected in its dominance, which in these cases shows us an increase. So, by establishing an objective criterion, for example, a 90-day average on the daily chart, we can identify clearly bearish periods.

And in this sense, the current moment is significant, with bitcoin dominance a little more than 1% above its 90-day average, which should put us on alert: the market is restless and insecure, and therefore, increases its concentration on bitcoin.

The putcall ratio confirms dominance

We can see this same situation in the PutCall ratio of bitcoin and Ethereum

No alt text provided for this image

Here we can see two important facts:

• The separation or spread between the two indices: Moving in a range of 25-30 basis points, which shows a market in a bearish disposition.

• The superiority of the Bitcoin ratio. Bitcoin’s higher index than Ethereum could imply less market risk aversion

This provision should be reversed in the previous two aspects to have a bull market indicator

The causes of lack of volume

Could it be that the lack of volume in the market is the cause of the two previous situations that we have seen?

Honestly… I doubt it. Rather, I think we can talk about what is the consequence:

Traders are out of the market by not appreciating a bullish or favorable context

So, all the data leads us to think that within the scenarios that we can propose, the optimist should limit himself to entering a phase of lethargy and laterality, waiting for a total recomposition of the market that involves the entry of new capital.

This could only be due to powerful incentives or news that changes the current bias that investors have about the crypto asset market.

Naturally, the other possibility is that there is an inflow of institutional capital, anticipating the imminent adoption of these technologies (as something inexorable that it is), but always driven by an important regulatory change that provides legal certainty.

The negative scenario that we can currently consider is the appearance of other negative news that seriously affect the market and that could end up undermining the little confidence that exists in the market.

In this way. I think the digital asset haters have already shown us the target: BInance

Attention to any news related to the reference Exchange, because it could mean a significant negative turning point

But while…. Let’s enjoy some Happy Holidays and prepare for a 2023 that will surely be exciting, one way or another.