An overview of the trading activities on the cryptomarkets. Studies on traded volumes, supply and demand situations, as well as periodic technical analysis of the most important crypto-currencies and indices, including the perspective of professional Traders.
Technical Analysis
Good Morning!
At the time of writing, Bitcoin (BTC) is trading at $46,153 (-2.6% in 7 days), below its 200-day simple moving average (SMA), which is currently $48,012.
The second largest cryptocurrency by market cap, Ethereum (ETH), is trading at $3,732 (-1.26% in 7 days), above its 200-day SMA, which is currently $3,393.82.
Ethereum vs. Bitcoin (ETHBTC): the spread between the two currencies is trading at 0.08095 (+1.34% in 7 days), above its 200-day SMA, which is currently 0.07012.
The year 2021 has ushered in 2022, and bullish sentiment continues to be low despite bitcoin's 13th birthday. Bitcoin is behaving more and more like a traditional finance risk asset, and in a sense, this is due to its success. In a ranking that includes public companies, precious metals, cryptocurrencies, and ETFs bitcoin is in 10th place ($837.5 billion) just below Meta (Facebook), and Ethereum ranks 19th ($444.37 billion).
Derivatives markets
The success of bitcoin and ether has attracted institutional investors, who want more and more exposure to digital assets, thus increasing the supply of financial instruments available. The realised volatility is decreasing year-over-year, and so is the exponential increase in value. The one-year at-the-money implied volatility on BTC went from 97.02% on January 4, 2021, to 67% on January 4, 2022. Similarly, the implied volatility of ETH went from 131% to 76%.
The futures market shows the same trends: BTC Futures Annualised Rolling three-month basis on CME went from 17.99% to 4.91% in one year, while the ETH basis went from 6.64% to 5.47%. In the coming weeks, we will see if the portfolio rebalancing had an impact on keeping the asset class down for most of December and if this same issue could help its recovery in early 2022.
Whichever the case may be, I believe that the most interesting price increase in 2022 will see the smaller coins - driven by retail, so-called "Ethereum Killers", non-fungible tokens (NFTs), exchange tokens, and DeFi - drive the crypto adoption, and increasingly centralise the crypto ecosystem. They will be the game-changers.
Here's to a great new trading year!
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