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On-chain demand spikes, but derivatives signal caution
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This week we analyze the continuation of crypto’s strong performance, as positive news surface, prices rise and demand shows signs of strength on-chain. We also evaluate demand expanding into riskier bets, particularly NFTs, and explore signs that the market may be getting too optimistic short-term.
Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether
- Bitcoin fees climbed a whopping 243% week over week, as Ordinals volumes reached a six month high driven by the listing of the ORDI token on Binance
- Ethereum fees increased to $41M over the last seven days as token prices and DEX volumes surged. Yesterday we also saw gas prices remain above 100 gwei for over an hour for the first time in three months
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges
- $230M of BTC was transferred into exchanges over the past week
- ETH recorded $430M in CEX outflows this week, and over $600M in the past fourteen days
Blackrock’s ETH ETF Adds Fuel to an Overheated Market
Crypto’s rally continues as optimism around a bull market grows. A few weeks ago we evaluated the arguments suggesting we’re at the beginning of a new Bitcoin cycle, and the signs have continued to spread expanding into many other crypto-assets.
Several crypto-assets are now recording their largest 30-day increases in price, while demand is showing strong signs on-chain. However, there are also signs that the market may be beginning to get overheated near-term.
Via ITB’s Custom Home Matrix
Strongest 30-Day Period in 10 Months — Multiple large cap crypto-assets are on track for 35%+ gains for the first time since the beginning of the year
- Institutional and whales’ demand has also picked up strongly, with Bitcoin seeing an 80% increase in the volume of transactions of over $100k, Ethereum of 170%, and Polygon over 3,800% (!)
- In terms of active addresses, LINK and TON have recorded the largest surge, climbing by 170%
- Long-term investors (hodlers) of large cap crypto-assets continue to accumulate for the most part, with only MATIC hodlers showing a slight decrease in the aggregate balance over the last 30 days
Driving the Rally — Market structure has become more bullish following several catalysts in the last few weeks
- The fake CoinTelegraph headlines of the Blackrock ETF being approved showed the market how quickly Bitcoin could rally once it actually goes through, increasing demand given the high likelihood it will pass
- Sell pressure from FTX/Alameda’s bankruptcy liquidation appears to have been less than anticipated, leading buyers to come back into the market
- Blackrock took the first step towards an Ethereum spot ETF yesterday, leading ETH 10% higher approaching its yearly highs
Crypto-native investors seem to be increasingly positioning themselves for a bull market, taking risks into smaller cap tokens and now NFTs too.
Via ITB’s NFTs Insights
5-Month High — NFT volumes reached their highest since July (both in ETH and dollar terms)
- The daily volume of NFTs traded surpassed $30M yesterday for the first time since the 2nd of July
- NFT volumes have begun trending higher again over the month and a half following a prolonged downturn
- Prices of many bluechip collections have recovered quickly, with CryptoPunks appreciating by 22% in ETH terms within 30 days
Bullish expectations appear to be spreading through every corner of the crypto market, and many may be asking themselves: is crypto overheated at the moment?
Via ITB Ethereum Derivatives Metrics
Funding Rates Raise the Alarms — Perpetual swaps funding rates for both BTC and ETH have reached their highest in over a year
- Funding rates are the fee that long (or short) holders have to pay when the price of perpetuals contracts are above (or below) spot prices
- Historically, large funding rates on either direction have marked points where the market has become over-extended, as was observed during the FTX collapse last November
- A year later funding rates in both Bitcoin and Ethereum are at their highs, suggesting the market is perhaps too eager to go long
- This is not necessary a signal that prices will crash imminently, as funding rates sustained at high levels for several weeks at points in 2021, but may point to the need for some caution
Crypto winter appears to be finally over. Strong demand is being reflected both on prices and in on-chain metrics. Several catalysts are pushing the market higher, and bullish sentiment is spreading across the market. While there are clearly many positive developments coming medium- to long-term, there are also some early signs of crypto getting overheated near-term.
Blackrock’s ETH ETF Adds Fuel to an Overheated Market was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.
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