News
25
Jan
crypto-market-review-3

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Market overview 1/25: Investors in full panic

The crypto market is in panic mode. The infection came from the stock market, which has really started to sink in the past week. Bitcoin has finally started to strengthen against altcoins. Though, it doesn’t help investors much because the dollar value has sunk so badly. The DeFi sector has lost a lot of TVL, but Fantom’s ecosystem has still grown a lot.

Bitcoin crashed close to summer 2021 lows

Bitcoin’s price is $36.300 at the time of writing this article. It was $42.000 just a week ago, which translates to a significant downfall. This is not even the whole story. Bitcoin crashed all the way to $33.000 yesterday. The price almost reached the lows of the summer of 2021.

Below is a graph of Bitcoin’s price development. One candle represents one week here.

btc-250122

As we can see, the bottom was found in a very interesting place. The crash from November’s ATH is the same we witnessed from April’s high to the July bottom. Now we can draw an ascending channel where tops and bottoms match precisely.

If you tried to find a short-term bottom for Bitcoin, this would be a logical place. It’s a whole another story whether this is the bottom of the entire bear market. Many analysts feel that Bitcoin is due to a short-term price rise any day now.

Bitcoin is so oversold in every major metric that we haven’t seen anything like this since the summer of 2021 and the March of 2020.  If history repeats itself, such bottoms have always been great buying opportunities. Bitcoin has also recovered from these levels in a matter of months.

Mayer Multiple is another good example.

mayermultiple

Mayer Multiple describes the relationship between Bitcoin’s current price and the 200-day moving average. Each time we’ve seen MM clearly below 1.00 it has been a great buying opportunity. Today’s value is 0.75. Mayer Multiple has been higher in Bitcoin’s history 88% of the time.

We have written the past two months about high inflation and the impact it has on the market. Now we are in an exceptional situation where central banks are tightening and ending the 10-year long party of low interest rates. This has an impact on cryptocurrencies too. That’s why the ongoing downtrend might be very different from the previous ones.

AboutBitcoin.io has had a negative view on price development for a long time. There are still no signs of a trend reversal. Investors should be very careful if there is a short-term price boost and Bitcoin moves above the 40.000-dollar level. This might be short-lived relief. Cryptos are still held hostage by the stock market.

The Fed chairman Jerome Powell is going to give a speech tomorrow (26.1.) regarding the current market conditions. Is Fed going to stay tough and even raise interest rates? This speech could have a big impact on the market one way or another. We will discuss it next week.

We recommend investors be mentally prepared for further lows. Even if this is a great buying opportunity from the historical point of view, it doesn’t mean that the market can’t go lower. If you are buying the dip, leave some dry powder for even lower dips.

Bitcoin’s dominance is moving higher

Bitcoin’s dominance is currently 42.4 percent. The number is more than two percentage points higher than a week ago. Bitcoin has looked very strong against altcoins.

The crypto market has been in a downtrend for over two months. Bitcoin’s market share has fallen most of this time, meaning altcoins have even done better than Bitcoin as a whole. Of course, we should remember the impact of stablecoins here. They are counted in as altcoins and lose no value in a market crash.

Last week this trend had a strong reversal.

cryptocap-250122

Seems like a full-scale panic was required for altcoin investors to dump their positions and move towards (relative) safety. Bitcoin’s dominance has climbed up in seven out of eight days and it’s up to three percentage points from the January lows.

Even if Bitcoin has strengthened against altcoins, the dominance is still historically low. It also looks like altcoins move up much faster every time there is any green in the market. Hence, it’s likely that Bitcoin will lose its dominance again when the market will eventually move up.

Every major altcoin is flashing red

Since Bitcoin dominance is rising fast, altcoins are heavily on red. This shows clearly in the top 15 rankings as well. The situation has improved a bit during today (25/Jan), but Bitcoin has still vastly outperformed all major altcoins.

Below is the status of the top 15 cryptocurrencies and their performance against Bitcoin.

altcoins-250122

Only stablecoins are green, but they are not relevant here.

Instead of looking at the biggest winners, we can pick the biggest losers: Cardano & Solana. Cardano’s ADA token is probably down so much since it moved up against the market in the previous week. Investors have now re-balanced their portfolios.

Solana has been suffering from technical issues. We wrote about the matter in detail in our news review. The network has been congested again, which has made investors increasingly anxious. SOL token has crashed harder than other major altcoins.

None of the top 100 cryptocurrencies has recorded positive price performance in dollars during the past seven days. Hence, there have been zero safe havens in altcoins. If the market keeps crashing further, Bitcoin is likely to keep it status as the best-performing major cryptocurrency.

Fantom is on the rise

The DeFi sector has lost liquidity just like every other sector as well. The TVL (Total Value Locked) has had one of the worst weeks in years by losing more than 35 billion dollars of liquidity in one week. To put this in perspective, the size of the entire DeFi market was 35 billion dollars a year ago.

There is nothing surprising in this crash because liquidity consists of both stablecoins and “normal cryptocurrencies”, which have lost value in dollar terms.

defi-tvl-250122

The market turbulence has also changed the top 10 Dapp rankings list. The liquidity protocol Maker has moved to second place, and its MKR token was also one of the best-performing altcoins last week.

Multichain entered the top 10 rankings just a week ago. Now it has climbed two places higher to sixth. It’s the only top 10 protocol that has gained TVL last week. It’s due to the strength of the entire Fantom platform.

defi-apps-250122

Compound has also returned back to the top 10. This means the top DEX, Uniswap, has been kicked out.

We have also seen changes in the blockchain ranking. The aforementioned Fantom stands out really strongly. Earlier today there was even news that Fantom had moved to third above Binance Smart Chain. At the moment, though, Fantom is just below BSC.

defi-chains-250122

Seems like it’s only a matter of time when Fantom moves to third and leaves BSC far behind. Terra and Fantom have looked like the strongest Ethereum challengers lately.

The market crash is also seen in the status of Ethereum. The market dominance was relatively stable in ~65% for the latter half of 2021. Now Ethereum’s dominance has fallen to below 59%. The main reason for this is Fantom.

It’s good to remember that Ethereum used to dominate more than 94% of the DeFi market just 12 months ago. Rivaling Layer 1 protocols have really gained traction in this sector.

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