Market Analysis with Mike Ermolaev
This week in the cryptocurrency market marked a period of dynamic resilience and excitement. Even with the hurdles of climbing US inflation and the prospect of higher interest rates, which usually make investors think twice about putting their money into riskier choices like Bitcoin, we've seen quite the opposite happen. Mike Ermolaev, with his rich background in crypto market analysis and leading the charge at CryptoDaily's editorial team, has dived into the latest trends exclusively for the GoMining community.
A Rising US Inflation Challenges Bitcoin's Climb
The total crypto market capitalization posted a 6% weekly increase, rising from $2.398 trillion from last Friday to $2.551 trillion as of this writing. Bitcoin (BTC) as always commands the lion's share of this market cap (at $1.40 trillion currently), fluctuating within a range of $68,170 to $72,426 over the past week and narrowly missing its March all-time high (ATH) of $73,835.
Source: TradingView
As evidenced by the 12-month US price growth accelerating from 3.2% in February to 3.5% in March, the economic backdrop paints a complex picture. When inflation goes up, it potentially leads to a tighter monetary policy to counteract inflation, which usually results in higher interest rates as well. Rising interest rates act as a headwind towards Bitcoin's growth as they can make riskier assets including Bitcoin less attractive compared to traditional safe-haven assets.
Traders’ Optimism and High Trading Volumes
Still, there’s overall optimism among the crypto market players which is clearly seen among derivatives traders as highlighted by the spike in CME premiums following Bitcoin's steady rise from $65,000. The annualized BTC premium rose from a three-month low of 9% on Friday to 13.5% on Monday, suggesting that traders are willing to pay a higher price for futures contracts, anticipating further price increases and an overall bullish trend.
Taking into account on-chain data, which reveals that the spot trading volume on centralized exchanges doubled in March, surpassing $2.5 trillion for the first time since 2021, we see further evidence of bullish momentum. First of all, this means more liquidity is available, which indicates that large transactions can be made without greatly affecting the market price. It is usually the case that more people enter the market when they are optimistic about its direction. They're seeing prices going up and want a piece of it, so interest and activity are on the rise. As more investors start showing interest, it's likely that the market will heat up even further.
Source: The Block
Bitcoin's Shifting Correlation with Traditional Markets
Another noteworthy observation is that Bitcoin's correlation with traditional market indices has revealed a compelling divergence, with K33 Research charting a significant decline in the 90-day correlation between Bitcoin and Nasdaq. In 2022, these assets moved almost in lockstep, but as we progressed through 2023 and into 2024, Bitcoin has increasingly danced to its own tune. According to K33 Research's analysis, the decoupling suggests that Bitcoin's price dynamics are swayed more by its unique ecosystem than by traditional economic indicators.
When it comes to daily correlation analysis, K33 Research points out the stark contrast depending on the timeframe considered. From a broader perspective spanning from 2016 to the current year, the correlation between Bitcoin and Nasdaq appears robust at 90%. Yet, a closer inspection of daily returns over the same period sees the correlation drop to a mere 25%. As of 2024, Bitcoin's notable price surge—approximately 70% to date—stands out even more when compared to the S&P 500's 10% increase and gold's 13% ascent, underscoring the cryptocurrency's distinctive market behavior.
Source: K33 Research
Ethereum's ETF Anticipation and Market Sentiment Surge
Meanwhile, Ether's upward swing gets additional support from the excitement among traders and hype surrounding the launch of ETFs. According to Deribit data, open interest in ETH options stands around $600 million at a $4,000 execution price, showcasing a vibrant market sentiment. At the levels of $3,700 and $5,000, the figure stands at $375 million.
Source: Deribit
The assets of ERC-20, propelled by Ethereum's surge, are also notably performing better, hinting at a growing confidence in Ethereum's future prospects. However, Ethereum futures' funding rates lag behind those of Bitcoin, indicating traders' expectations of Ethereum's continued underperformance relative to its peer.
Potential Mining Shifts and Record Network Difficulty Ahead of Bitcoin Halving
The network's difficulty has undergone its final recalibration before the halving, increasing by 3.92% to a record 86.39 trillion hashes. The average hash rate has consistently exceeded 600 EH/s. With the halving expected to occur on April 19, the industry braces for impact.
Source: CoinWarz
The digital landscape of Bitcoin mining is poised for a seismic shift post-halving, as highlighted by Galaxy Digital's research. The halving event is expected to render 15-20% of the network's computational power unprofitable. This could potentially lead to these less efficient operations being phased out of the network.
Despite the upcoming significant change, the perspective within the industry remains optimistic. According to CEO of CryptoQuant Ki Young Ju, following the Bitcoin halving event in 2020, the crypto market experienced a parabolic bull run, which was substantial enough to cover the increased costs of mining and still lead to profitability in mining Bitcoin. On-chain indicators echo the sentiment following previous halvings, suggesting a favorable environment this time as well.
Toncoin's Rapid Growth: Surging Prices and Exciting New Developments
A coin worth separate mention, Toncoin (TON) stood out with price jumps over different periods and an ATH this week, propelling it into the top ten by market capitalization. Toncoin surged by about 38% increase over the week and posted a solid 66% gain over the month. As of now, its market capitalization stands at approximately $24.56 billion, with a recent peak price hitting an all-time high of $7.63.
Excitement is in the air around TON, with new developments surfacing that might spark even more growth. There are rumors that the announcement of TON-based USDT will take place at the Token 2049 conference, which promises to enhance its utility.
Source: TradingView
SEC vs. Coinbase and US Treasury's Push for Tighter Crypto Regulation
On the regulatory side of things, the talk right now is about the SEC taking Coinbase to court. The legal drama continues as Coinbase's attempt to get the lawsuit dismissed was unsuccessful—the court's decision just adds another chapter to this long-drawn-out legal drama. Everyone's eyes are on this case, with both parties required to submit a case management plan by April 19.
At the same time, the US Treasury Deputy Secretary is rallying for more control over crypto services so that their efforts are not limited to focusing on local providers but also those operating globally. In his testimony, Deputy Secretary Adewale O. Adeyemo is urging for tighter rules to keep digital currencies from falling into the wrong hands. The message reads clearly, "We need to build an enforcement regime that is capable of preventing this activity as more terrorists, transnational criminals, and rogue states turn to digital assets."
Conclusion
So, rounding off our weekly dive into the crypto market trends, it's clear that even with the squeeze from inflation and higher interest rates looming, the crypto world is holding strong. Bitcoin's substantial trading volumes along with fading macro correlation, Ethereum's optimistic stride driven by market enthusiasm and anticipation of ETF launches, TON's leap, and the mining sector's preparation for the halving event collectively sketch a vibrant yet complex picture of the cryptocurrency ecosystem. At the same time, with the SEC paying more attention to Coinbase and the US Treasury pushing for stricter rules, it is evident that regulations are playing a bigger role in deciding what comes next for this industry. This mix of outside control and natural shifts is largely going to steer where cryptocurrencies head next.
Disclaimer: Please remember, the information discussed here isn't meant to be taken as investment advice. Conduct your own research and consult with financial advisors before making any investment decisions.
April 12, 2024
