Market Wrap: Bitcoin Back Above $48K, Expect Consolidation
Bitcoin is back above $48,000 as buyers responded to intraday oversold signals. The world’s largest cryptocurrency is up about 9% over the past week, compared with a 7% rise in ether and a 30% rise in Cardano’s ADA. The bounce in cryptocurrencies occurred alongside gains in stocks on Wednesday.
Despite lower trading volume, analysts expect cryptocurrencies to consolidate near highs before buyers return for the next leg up.
EToro, a multi-asset brokerage, released second-quarter earnings Wednesday, reporting $362 million in trading commissions, a 125% year-over-year increase. Yoni Assia, eToro’s co-founder and CEO, told CoinDesk that traders have been diversifying across cryptos and stocks this year.
The platform’s retail customers never really dropped out of the market during the price correction a few months ago, Assia said. “The majority held through and continued to hold/add to cryptos,” he said.
Bearish bitcoin bets
Hedge funds and other large traders continued to pile into bearish bets on bitcoin last week. The tally of short positions has increased by 6,000 since July 20 to hit the highest in three months. But the data doesn’t necessarily indicate that the traders are betting on outright price declines.
The spike in leverage funds’ short bets might have stemmed from a return of the so-called carry trade, which involves buying the cryptocurrency in the spot market against a short position in the futures market.
That means bitcoin market makers may be short on the Chicago Mercantile Exchange (CME) and hedged on native exchanges, reports CoinDesk’s Omkar Godbole.
Subdued trading volume
The seven-day average real BTC trading volume is still around $5 billion, less than half of what the market witnessed the last time bitcoin was at $50,000, Arcane Research analysts wrote Tuesday in a report.
If trading volume continues to be relatively flat and bitcoin prices push higher, the market could become exhausted and the rally won’t be sustainable, the analysts said.
Cardano vs. ether
ADA is pulling back from an all-time high around $3 and could find lower support between $2.40-$2.60. The cryptocurrency remains in breakout mode after successfully holding the 200-day moving average in July.
Some analysts view Cardano, Solana, Terra and others as direct competitors to Ethereum.
“These blockchains are dubbed ‘Layer 1’ as they provide two main functionalities – settling on-chain financial activity and launching decentralized applications,” digital asset manager 21Shares wrote in a newsletter Tuesday.
“We believe this rise of Layer 1 [cryptos] outside Ethereum is predominantly driven and hyped by retail investors since institutional-grade investment products on these underlying assets are only available in our product suite, except for Luna, which no issuers offer at the moment,” 21Shares wrote.
ADA also broke out relative to ETH on Aug. 17. The ADA/ETH ratio appears overbought, but will likely hold support given renewed upside momentum in ADA.
DeFi stablecoin lending rates rise
The stablecoin lending rates in the decentralized finance (DeFi) market is ticking up, according to crypto data analytics firm Skew.
The increase could be short term but is worth watching closely, said Dan Weiskopf, co-portfolio manager of the Amplify Transformational Data Sharing ETF at Toroso Asset Management.
“If the doubling of the yield from the 3% to 4% range continues, there could be an issue in the promised land; nothing is free and getting paid a lot for something that is stable could be a sign of something to come,” Weiskopf wrote to CoinDesk.
”This increase is also curious after July’s lull in trading activity, so we will be watching for volatility,” Weiskopf noted.
Notable winners of 21:00 UTC (4:00 p.m. ET):
filecoin (FIL) +3.62%
polkadot (DOT) +3.08%
the graph (GRT) +1.58%
dogecoin (DOGE) -1.87%
cardano (ADA) -1.77%
algorand (ALGO) -0.75%Source