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Key factors driving crypto in the short- and long-term
This week we cover this week’s volatile price action. We explore key factors behind the ups and downs, top performers, as well as the growing liquidity reflected in the stablecoin market and the increasing maturity of the DeFi space.
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 sustained at high levels along with Ordinals transactions
- Ethereum fees also remained high, with the amount fees being burnt leading ETH’s supply to its lowest since August 2022 per Ultrasound.money
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges
- Bitcoin recorded $860M net inflows into exchanges, the highest value since March of this year
- $80M worth of ETH was transferred into CEXs this week
Crypto Liquidations & Quick Recovery
Crypto markets experienced a sudden correction on Monday, but have since recovered most of the drop. $440M in long positions were liquidated, per The Block data, suggesting market participants were highly levered going into the end of the year.
Source: IntoTheBlock’s Capital Markets Insights
Market Analysis — Macro conditions are helping boost risk seeking behavior in crypto
- This week the Federal reserve left rates unchanged as expected, but delivered an outlook with more rate cuts in 2024 than previously disclosed
- Stocks rebounded strongly following the news, with the Nasdaq being just 1.5% away from breaking it’s previous all-time highs
- Bitcoin and Ether recovered most of Monday’s losses, while smaller cap assets such as the Layer 1 Injective and the dog token Bonk reached new all-time highs
The strong price performance and speculative activity show signs of the market seeing large inflows.
Source: IntoTheBlock’s Stablecoins Perspectives
Stablecoin Market Cap Growth — The total value of stablecoins is on track to climb for the second month in a row for the first time since Q1 2022
- The increasing market cap of stablecoins is a positive sign for crypto liquidity
- Following a year and a half decline, liquidity appears to be flowing back into crypto in the form of stablecoins
- Despite growing by nearly $10B this quarter, the market share of stablecoins has decreased, suggesting that the increased supply in stablecoins is helping support markets
In other news in crypto, the amount of yearly losses to exploits in DeFi are poised to reach their lowest since 2020.
Source: IntoTheBlock’s DeFi Exploits Perspectives
Relatively Better, But Still Needs to Improve — Losses in DeFi are on track to their lowest since 2020, but recent incidents remind us there are still issues
- Early on Thursday, a code library for Ledger Connect was exploited leading to approximately half a million in losses
- Multiple applications and wallets that interact with Ledger Connect were potentially vulnerable to the attack, though it was quickly identified and fixed by most services
- The total amount lost to exploits in 2023 may be its lowest in three years, but incidents such as this one show that using crypto apps is still risky
Looking into 2024, liquidity appears to be flowing back into crypto and DeFi applications have been benefitting from it. Though it is uncertain how long the current momentum will persist, in the long-term picture crypto is showing signs of maturity slowly but surely.
Crypto Liquidations & Quick Recovery was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.