Recurring market commentary on what's happening in the crypto markets, summarized by the Crypto Broker team at Crypto Finance AG.
Market commentary
Good Morning!
During price consolidations, market participants generally get bored by the choppy price action without a clear trend. I think that during these periods, you can learn a great deal about the market structure and the potential changes to that structure. Usually, the changes become very obvious once there is a trend again, but a majority will have missed the first larger move.
I was watching the order books over the past 2-3 weeks like a hawk. Up until late on Sunday night (European time zone), we saw the same picture over and over again. This was when Bitcoin (BTC) was pushing higher towards the upper leg of the decending triangle.
Bitcoin BTC (4h)
All exchanges showed massive sell orders with almost no refill on the buy side. Not only for spot, but also for the perpetual futures. This changed about 8 hours ago, and we now see large buy orders and sellers shying away.
Another development to keep an eye on is the 17k BTC short on margin on the Bitfinex exchange. We are talking about a short position roughly worth 600 Mio USD. You can see on the chart below that the person opened the shorts between 35'500-36'500. What makes it interesting is not the fact that someone opened a short that big (since I believe this trade only shows half of the story). But the fact that we saw a similar trade setup around May 17th before the market moved lower. In USD terms, we are talking roughly the same amount of roughly 500 Mio. USD (less coins but at a higher price).
When moves happen this fast, it is always useful to check if derivatives were involved. Most of the time they are the fuel for quick and aggressive moves. But not this time…
Perpetual funding rates and future term structures are not showing any signs of traders using extensive leverage to push the price.
And on top of this, we have barely seen any liquidations.
So, what did altcoins do during the consolidation of BTC? They briefly tried to recover just after the crash, but had to give in or step aside for bitcoin. The MID, SHIT, and DEFI index on FTX plotted versus BTC; they all lost about 20-25%.
MIDPERP/BTC 4h
And by the way… so did Ethereum (ETH)…
Ethereum/Bitcoin ETHBTC (4h)
What is my conclusion to all of this?
The change in the order book structure plus the very neutral derivatives market is a first indication that we are building a bottom. On top of that we are seeing people rotating out of altcoins back into bitcoin. This is all happening during a series of negative headlines – especially for bitcoin. I am looking forward to further gains in bitcoin, and at some point I even expect the crazy retail player to return to the market (this is when the leverage comes back into the system). Altcoin bag holders have to wait a little longer. If bitcoin marches on, it will suck in most of the liquidity, which will leave no space for others. My best guess is that BTC will push back up to the 44'000-50'000 range and stay there for some time, which will give altcoins a chance to catch up.
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