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On-Chain Data Shows Shift Towards Stablecoins and Bitcoin
As per data from on-chain analytics firm Glassnode, there seems to be a trend where investors are moving their assets towards less risky investments such as stablecoins and Bitcoin. The state of altcoins now stands delicately balanced, caught between the potential for a positive or negative breakout.
Glassnode’s dissection of Uniswap and futures trading data shows a noticeable slowdown of the upward trend from Q1 2023 starting in April. The report attributes this cooling off to regulatory fears and liquidity issues, pushing traders to embrace a more conservative stance.
Analysis of Uniswap’s Trading Volume
At first glance, the rise in Uniswap’s trading volume seems to be driven by memecoins. However, a deeper examination of Uniswap’s pools suggests that the bulk of the volume came from top cryptocurrencies like Wrapped BTC, Ether, and stablecoins.
A significant amount of this trading activity also consisted of sandwich attacks and bot trading. The report elucidates:
“Considering that a lot of bots participate in arbitrage or sandwich attacks, the extent of 'natural' trading volume on Uniswap could be more than two-thirds of all DEX activity.”
Decline in Ether’s Futures Trading Volumes
Ether's futures trading volumes on centralized exchanges decreased in May, with the 30-day average trading volumes falling to $12 billion daily, contrasting the annual average of $21.5 billion.
According to Glassnode analysts, this drop in futures trading volumes suggests that "institutional trading interest and liquidity continue to be relatively low."
Shift in Market Share of Bitcoin Perpetuals
A sizable disparity is also evident between the market shares of Bitcoin perpetuals and their Ether counterparts, with Bitcoin dominating at 65.5%. In 2022, the shares of the two assets in the perpetual swap space were equal. This trend, however, has seen a notable shift over the past year.
A large share of capital outflows from Binance USD and Circle’s USD Coin has been absorbed by Tether, causing its total supply to reach a new high of $83.1 billion.
Capital Flow Trend in Crypto Market
Conventionally, capital in the crypto market moves from the major players, like Bitcoin and Ether, towards altcoins. Recent trends, however, indicate that capital is being moved away from high-risk altcoins and towards safer assets like stablecoins and Bitcoin.
Bitcoin's Strength Compared to Altcoin Price Momentum
Bitcoin's dominance percentage over the total cryptocurrency market, which represents Bitcoin's market cap's share in the total crypto valuation, had been on the rise in 2023 before it hit resistance at the 48.35% level.
If Bitcoin investors can't push past this resistance, we might see an altcoin surge in relation to Bitcoin. However, the TOTAL2 chart, which reflects the market cap of the crypto market excluding Bitcoin, shows a reversal of its positive breakout from the triangle pattern, pushing the index back into a bearish triangle pattern that has been in place since October 2022.
Currently, the total market cap of altcoins is constrained by a bearish descending triangle pattern with lower highs and a parallel support level of $433.39 billion. If this level is breached, we can expect a sharp sell-off.
However, if investors manage to build support above the parallel resistance at $616.35 billion by the end of the week, we might see altcoins continue their upward trajectory in the coming weeks.
