Dear subscribers,
Bitcoin is headed into the weekend flat in a high-risk environment with low volatility. The sideways trend endured and is oxygenating altcoins, such as the one we will analyze further down.
Let’s dig in!
State of the system
Bitcoin’s state of the system is at the transition quadrant despite the charged macroeconomic week.
The SBT Risk Signal accelerated and the renewed bullish momentum faded.
While bitcoin continued to dominate the market, the solid holding of $20k (Figure 19) oxygenates altcoin moves, such as the one seen in Figure 17.
Figure 1: Bitcoin at the transition quadrant
Following the 75bps rate hike and disappointing press conference held by J Powell, the risk intensified, bitcoin’s trend and fundamentals remained neutral, while bitcoin continued to drive the market.
Figure 2: The market in a snapshot
Risk
Since Uncharted #26, the SBT Risk Signal plummeted, paving the way for the run to $20k (Figure 3). However, pressure spread over from traditional markets, driving the said signal back to the high-risk zone.
Figure 3: Pressure spread over from traditional markets
All roads lead to the DXY, its sensitivity to inflation, tighter monetary policy, geopolitical tensions, global recession risks, and its strengthened inverse relationship to bitcoin (Figure 4).
Figure 4: Strong inverse relationship between bitcoin and the DXY
It has become clear that the DXY and its close ties to traditional assets are the leading risk factors for bitcoin. Notice how the correlation between bitcoin and the S&P 500 strengthened despite the former outperforming the latter (Figure 5).
Figure 5: DXY pushed all asset classes lower
From a price perspective, risk eased as realized volatility dropped to levels not seen since May 2020 (Figure 6, top graph). However, the share of unrealized losses increased, which could lead to selling if volatility picks up (Figure 6, bottom graph).
Figure 6: An uptick in volatility could lead to renewed selling pressure
Bitcoin’s momentum and direction
Despite the intensified risk in the system, bitcoin’s mid-term trend remained neutral as the SBT Momentum Index remained neutral (0) and the price remained above the 50-day moving average (Figure 7).
Figure 7: Neutral mid-term trend
When looking at bitcoin’s relative position to its moving averages (Figure 8), we can observe that the short-term bullish momentum faded into neutral, as denoted by the downward slant from 32 SMA to 8 SMA. Needless to say that the outlook remained bearish on the longer end (right).
Figure 8: Short-term bullish momentum faded
There are no evident signs of a sustained move upward or downward. On the contrary, the increased spot volume (Figure 9) and extended sideways trend suggested a potential gentlemen’s agreement to hold the price at current levels ($20-$22k), which in turn creates an environment ripe for pops in altcoins, like the ones featured in the next section.
Figure 9: Increased spot volume suggests an agreement that bitcoin is where it needs to be
The reduced traded volume in the futures market (Figure 10) reinforced the thesis of a lack of speculation to the up and downside as the spot market continued to drive the price action.
Figure 10: The spot market continued to drive the price action
There is a noticeable lack of institutional interest in bitcoin under the current conditions. The ETF and ETP markets reflected the same apathy, with bitcoin logging $13.4mn in inflows, representing 0.07% of the AUM (Figure 11).
Figure 11: Apathy in the ETF and ETP market
Altcoin perspective
The traded volume for altcoins reflected the same apathy noted in the ETF and ETP markets - $7.9mn in outflows (Figure 12). The widespread trend denoted a significantly low volume compared to the 2021 alt season, as bitcoin drives the market.
Figure 12: Significantly low altcoin volume
Furthermore, we can observe the prevailing trend for the top 100 altcoins remained neutral (Figure 13), as the below heatmap shows a lack of clear direction despite certain skewness to the upside.
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