Massive Ethereum momentum

19 Jul 2022

Massive Ethereum momentum

It’s been a week filled with impactful news headlines, leading volatility to grow. Bitcoin and the overall crypto market have experienced strong momentum over the last week, pushing BTC towards its consolidation range highs of $23,000.

The crypto market sees a strong recovery this week, with bitcoin making a push to its consolidation range highs of $22,000. However, the most remarkable recovery is seen in ETH, seeing an enormous 40% week, pushing ETH above $1,500 and the ETHBTC ratio to May levels.

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Source: Tradingview (Coinbase, Binance US)

It’s been a week filled with price-driving news headlines, leading volatility to grow. Another inflation surprise kicked in as U.S. June CPI printed 9.1%, well above the expected 8.8%. While this initially negatively affected the market, statements in favor of a 75bps rate hike from FED’s Bullard injected slight optimism to bitcoin and U.S. equities. BTC’s correlation to U.S. equities tends to grow amid important macro events. This is also evident this week, as BTC’s correlation to the S&P sees further growth. The 90-day correlation peaked at 0.655 last week, near the all-time highs from early May.

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Source: Coinmetrics

Further, Celsius’ Chapter 11 filing and the release of legal documents related to the Three Arrows Capital creditors erased some crypto-specific uncertainty from the market. Alongside the progress in Ethereum’s merge, this has likely been the key driver of ETH’s and ETC’s remarkable gains.

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Source: CoinGecko, messari.io

Large caps outperform as ETH dominance see massive growth

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Source: Bletchley Indexes, Tradingview (Coinbase)

The strength of Ethereum has pushed the Large Cap index to see 28% MTD gains, vastly outperforming the rest of the market. The other altcoin indexes also see a strong week, with both Mid Caps and Small Caps seeing 19% gains three weeks into July. Bitcoin, on the other hand, is underperforming the rest of the crypto market, seeing 12% gains so far this month. Bitcoin’s relative underperformance is reflected in a large decline in BTC’s market dominance, falling 1.59% in the last seven days. Furthermore, stablecoins are experiencing a massive reduction in their market share, which is to be expected as the total altcoin market experience buoyancy.

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Source: CoinMarketCap

Ethereum’s strength has caused its market share to soar by 3.41% in the last seven days. Other major altcoins see their market share aligning with last week’s levels. This suggests that we’re currently seeing a rotation from BTC and stables into ETH, with smaller altcoins enjoying the general uptrend in the market.

74-day streak of extreme fear finally broken

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Source: Alternative.me

The Fear and Greed index has climbed from the extreme fear area after a record-long 74-day streak of extreme fear. This push is affected by the strengthening momentum in the market and the Ethereum rotation noted in the previous slide. While the sentiment is improving, the Fear and Greed index remains deep in the fearful territory, and other viable sentiment indicators from the derivatives market suggest that market participants still exercise caution.

Binance’s fee elimination leads volume to stay elevated

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Source: Skew, Tradingview (Binance, Binance US, Bitfinex) *Includes Bitwise 10 exchanges, LMAX, FTX.

The bitcoin spot volume stays high, and Monday, July 18th, saw $10bn worth of bitcoin changing hands, while the 7-day average trading volume sits at a respectable $6.6bn. Nevertheless, this high volume remains fueled by Binance’s no-fee BTC trading environment. In the last seven days, Binance has accounted for 76% of the global bitcoin spot volume, compared to the earlier market share of Binance, ranging from 50-60%. Outside of trading activity on Binance, spot volume remains muted.

Volatility climbs higher

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Source: Tradingview (Coinbase)

Bitcoin’s volatility remains high as bitcoin’s 7-day volatility climbs to 4.1%. The current volatility in bitcoin is high compared to the volatility seen during the summer of 2020 and 2021. Several important price-driving news headlines influence this elevated volatility. While volumes remain comparable to the last summer (when excluding the Binance surge), the hectic news cycle and reduced liquidity contribute to elevating the volatility.