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April 16, 2021

Weekly Market Roundup

The Coinbase listing was no doubt the biggest development for digital assets this week and while crypto purists may disagree, the listing away from crypto exchange will not dilute the underlying ethos that digital assets represent.

Overall, the price action was choppy and, fascinatingly, large cap coins actually outperformed, although the gap vs small caps did close during the closing stages of the week; year to date, small caps MVIS index is now trading up close to 440%, while large-caps index is up 140%. This is proof the bulls are in firm control of the markets.

Risk-on

The open interest on Bitcoin futures extended to a new high, as did Ethereum, but more importantly it was the growth across other assets that really highlights the ever-growing appetite for alpha. This is evidenced by long-term sentiment remaining firmly bullish, even if the short-term appears to have flattened as participants take profits after a number of assets hit new highs.

Altcoins including BNB, DOT, TRX, EOS, SUSHI, AAVE, and many others, saw an exponential rise in OI, however, the froth and the hype that sent the futures term structure to over extend dramatically last week was offset by more measured approach that was evidenced in the options market. While still bullish, flows point to a much more managed upside traction, as opposed to the exponential moves that were evident earlier in the year.

There is also the chance that, if it continues on the current trajectory it has maintained so far this year, that BNB overtakes ETH as the second-largest crypto asset. This isn’t extremely likely, but also not out of the question – especially when you consider that Pancake Swap’s total value locked (TVL) has overtaken Uniswap and (of course) Sushiswap.

The 800-pound gorilla in the room

One should not be fooled into thinking that it is normal for an asset that commands a market cap of over $1 trillion to have price swings of 10 percent or more per day. As such, the volatility and daily price range will begin to abate as more capital enters derivatives space and, while profit taking by long-term holders in the wake of this slowing upside may be a natural expectation, it is more likely that Bitcoin will be securitised further and locked to be utilised elsewhere. Namely the DeFi ecosystem, where at the time of writing over 193,000 Bitcoins are locked on Ethereum to be eventually put to work across a plethora of yield farms and liquidity pools.

However, the success of Binance Smart Chain (BSC) in grabbing market share from Ethereum goes to show that dominance is a fickle beast and that, while some market participants will not surrender to their inner beliefs and will not move to competing (less decentralised) networks, there are a host of others that show no true allegiance to protocols.

With that in mind, it is worth noting that there’s now more of the dollar-linked stablecoin Tether on the Tron blockchain than on Ethereum, possibly a sign that crypto traders are favoring the network’s lower transaction fees.

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