Trick or treat

If it were for the cryptoasset market, it might look like Halloween instead of the beginning of Summer. The market is indecisive and on hold, but within this context we see a new attempt at level consolidation. There is a feeling that the drop and the debugging has been more than enough. 

Despite this sentiment we already know that reality always prevails, so we must be very attentive to any news, especially regarding the health of the protocols. If this crisis has revealed anything, it is that this is an ecosystem that is no stranger to bad practices, and we are rightly talking about risk management. 

Recognizing that by its very structure decentralized finance may favor such undesirable developments, we have to be very cautious and act accordingly. It is worth remembering that Decentralized Finance replicates the current financial system, but surely we should assimilate it more to what we know as Investment Banking, the riskier and more professional part of the financial system.

Compounding and other practices can be very powerful levers, but as levers they have a very important multiplier effect, and this fact must be taken into account when accounting for risk.

Possible movement in sight

Technical analysis, regardless of these conditions, what it shows us is a technical figure that advances what could be a relatively important movement. The market compression is going to look for an escape route, and in that sense, as always, we as traders will stick to the design of scenarios.

Bullish scenario

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In the positive scenario, we could see a market reaction out of this compression zone that would lead to a rapid ascent to the 29,000 USD area. After such an ascent, we would almost certainly see a correction that should respect the guideline, and subsequently an attempt to pierce the 29,000 USD high.

This leaves us with a very interesting scenario from a long-term point of view, because it would recover the channel zone defined in the Stock-to-Flow model so often used in Bitcoin.

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Bearish scenario

The bearish scenario in which we could find ourselves is much more uncertain than the positive one. We have the annual low at 17,900 USD and from there we have no recent references, so it is an unknown what we could see. We would see how the market defends this area of lows.

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Futures expiration

Today we must be especially attentive to the market because we have a semi-annual expiration of futures and options, a date that is always marked in a special way in the calendar.

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Although in this case the data tells us that the volume of open positions is not very high, it is even below the normal monthly closing. Surely and given the market situation, many of these positions have already been closed previously, but we must keep in mind that normally these situations always cause a certain decline in prices.

Ethereum replicates the triangle figure

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The case of Ethereum is similar to that of Bitcoin, with a technical breakout figure that gives us a first target slightly below 1,300 USD and with a subsequent one above 1,500 USD.

We know that the theory is easy to put forward, but the context is decisive. We must bear in mind that in order to see these market movements materialize, they must be accompanied by a significant entry of volume. This can serve as a validation of both scenarios.

The volume of each market movement is very important at this time

DeFI is back to business as usual… but with less LTV.

Another factor to take into account is how the market has been adapting to this situation.

This drop has not dampened investor confidence

I think this is clear when we look at the 7-day evolution of the ecosystem:

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This is extremely positive and demonstrates the robustness of the ecosystem as a whole, which does not exclude the possibility of seeing projects disappear due to the fucking Darwinism of the market, but I even dare to qualify this as something positive and a clear symptom of the health and power of the cryptoassets market.

The extraction of large operators continues

Examining the operations over 10 million USD, we can also see how the trend of value extraction from exchanges remains unchanged, marking this week an outflow of assets over 3 billion USD.

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If we look for detail, we see that the distribution shows two remarkable facts:

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  • Strong commitment to Bitcoin, being the most traded crypto-asset and with a positive mining balance.
  • Protective strategies reflected in the acquisition and storage of stable coins.

Large traders continue with defensive strategies

Patient waiting… trick or treat?

The market without negative news remains stabilized at the moment, if this situation is prolonged over time we will almost certainly see how the underlying trend, the sentiment of traders (which is bullish given the levels reached) will be imposed, but it is still early to think of major advances.