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Market overview 1/4: No surprising events after the New Year

The year 2022 has started exactly how the previous one ended. Crypto investors are mostly depressed and fearful. The Bitcoin price is moving mostly sideways, and Bitcoin is losing its dominance simultaneously. Smart contract platforms and DeFi tokens have performed best. Convex Finance and Curve are dominating the DeFi sector.

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Bitcoin’s price is moving sideways

Bitcoin’s price is $46.700 at the time of writing this article. The price was about $49.000 a week ago, and we have seen Bitcoin’s price move between 45K and 52K for some weeks now. Nothing major has happened in the first days of 2022.

The graph below shows Bitcoin’s price development over the past few months. One candle represents one day. The blue trend line is the 50-day moving average and the purple trend line is the 200-day moving average.

btc-040122

As the graph shows, Bitcoin hasn’t gone anywhere in weeks. It’s moving sideways in a clear channel between support (~45K) and resistance levels (~52K). The bottom of the channel is bought every time, but there is too much resistance for the price to move higher.

Bitcoin’s price is also below the 50-day and the 200-day moving averages. This is not a good thing. The orange trend line is the only glimmer of hope here. Bitcoin broke this downtrend right before Christmas and made it new support.

It just seems Bitcoin is lacking rocket fuel to climb higher. The overall mood of the market is way too negative. Trading volumes are also very low signaling a general lack of interest. Investors also feel very uncertain about the near future.

We can see the impact of the year 2021 still in the markets. December was supposed to be full of fireworks, just like 2013 and 2017. But now it looks like Bitcoin’s four-year cycle theory is broken. The ongoing bull market is progressing in a different fashion.

The lengthening cycle theory is reaching more and more popularity. Both Data Dash and Benjamin Cowen (Youtube channels) have been talking about this for months. Below is a fresh video from Cowen which describes it.

Both Data Dash and Cowen have predicted that each bull cycle will be longer than the one before. If this theory is correct, we would see the top of the current bull market in early 2023 or late 2022.

There are also macro-level worries. The Federal Reserve is taking increasingly fast steps toward tightening and rate hikes. This creates a major hurdle for the stock market. The process is also impacting cryptocurrencies in a negative way.

Investors are currently divided into two camps. Others feel there is going to be a massive crash in all markets while the other side doesn’t believe that Fed could ever raise rates and tighten the monetary policy. The reason is that central banks cannot crash the stock market on purpose. The global debt is also at levels which cannot sustain even 1% rates.

Predicting the future feels more difficult than ever before. Traditional Bitcoin price models are broken, and inflation has become a problem first time in 40 years. We must take one day at a time and monitor the market closely.

Bitcoin’s dominance at a critical level

Bitcoin’s market dominance is 39.6% at the time of writing this article. The number was 40.5% last week. When we look at the big picture, we can see a strong downtrend continuing day after day.

cryptocap-040122

Bitcoin’s dominance has reached a critical level. The 39.5% is the level where the crash of spring 2021 ended. Bitcoin’s market share also hit this same level in September. In both cases, Bitcoin bounced back to much higher levels.

We have seen further evidence in the previous weeks that altcoins are tolerating price movements better than Bitcoin. Does this mean that Bitcoin will lose its ~40% dominance and fall much lower? Are altcoins finally taking over?

The historical bottom of the CRYPTOCAP index is 35.4%. It wouldn’t be a shock if we tested this level in the coming weeks.

Smart contract platforms have performed best

Since Bitcoin’s dominance is falling, altcoins should be doing well. This is the case in the top 15 ranking list as well, though, there are both winners and losers. We are also talking about just marginal movements up.

Below is a list of the top 15 cryptocurrencies and their price-performance against Bitcoin.

altcoins-040122

When we leave out stablecoins it’s obvious that smart contract platforms have performed best. There is nothing surprising in this development – it has been an ongoing process for months.

When we go down in the rankings, we can see that this same trend continues. Cosmos +47%, Fantom +34%, Harmony +36%, and Near +26% are examples of well-performing platforms in the top 100 list.

Chainlink is also doing great: LINK token has moved +14% against Bitcoin in the first days of 2022. We discussed Chainlink in detail in our news summary.

Some of the DeFi tokens have also woken up. Both Yearn Finance and Curve have risen more than 35% against Bitcoin in one week. We are predicting that there could be a wider sector rotation towards DeFi in Q1 of 2022. There are no clear signals of such just yet, but let’s keep our eyes open.

No major events in the DeFi sector

Finally, let’s look at the DeFi sector. There haven’t been any significant moves during the holidays. The TVL of the entire market is $254 billion. This is exactly what the TVL was also a week ago.

defitvl-040122

The TVL of the DeFi market reached its peak in early November, meaning two months ago. Since that, the market has gone sideways or slowly downwards.

We can see one change in the protocol list. Convex Finance has overtaken Maker and claimed 2nd place in rankings. It also broke the $20 billion TVL milestone for the first time.

defi-protocol-040122

The DeFi market is properly dominated by Curve because Convex Finance is very much connected to Curve as well. Convex Finance is merging the liquidity of thousands of users and buying the Curve platform’s veCRV tokens. They offer higher yield and voting rights to token holders.

Some people say there’s “The Curve Wards” going on. If you want to know more, check out this video. To put it simply, Convex Finance offers the same service as Curve but with a higher yield. No wonder it has exploded in popularity.

We have also seen some changes in the platform ranking list.

defi-protocol-040122

Terra has strengthened its position as the second-largest DeFi platform in the market. Terra climbed over Binance Smart Chain in late December. Back then, Terra’s TVL was still below $18 billion. Soon we should witness Terra breaking the $20-billion barrier.

The best performer is Fantom. This platform has grown its TVL by over 25% leaving all other major DeFi platforms far behind. The growth is heavily supported by the Anyswap protocol, recently branded to Multichain. It’s a cross-chain protocol enabling token trades from one blockchain to another.

We should also notice 9th place Cronos. This is the smart contract platform launched by Crypto.com in 2021. Most people know Crypto.com from its Visa debit cards, but the project is also competing in this sector. The biggest Dapp of Cronos is VVS Finance.

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