Given that Bitcoin market (BTC) has really slowed down in the past few days, with virtually no change since yesterday, we’ll take this opportunity to have a look at the broader crypto markets. On the whole, the crypto markets continue to go risk-off, not many traders are ‘buying the dip’, and crypto (and gold) remains mostly correlated to the traditional markets.
We start with a view of Bitcoin dominance versus ‘Other’ dominance (the general altcoin market starting with mid-caps and going down). Generally, a ‘risk-on’ market attitude is when Bitcoin’s price is rising even as its dominance falls; a ‘risk-off’ profile, like what we see currently, is a falling Bitcoin price coupled with rising dominance.
Bitcoin dominance has so far been rejected in its new ascent, at the significant 67% level. If it were to retake this level, it would be a very interesting and potentially worrying development: this is because 67% represents a level of altcoin depression not often seen since 2017.
The next chart is Bitfinex’s longs-vs-shorts table, and here we see that few on Bitfinex are interested in longing Bitcoin at this time compared to a few months ago. On the other hand, short selling seems to be picking up for the leading crypto, with a upward pressure on a trendline suggesting a bearish market sentiment.
This state of market fear represents a high level of potential profit for longs, if in fact Bitcoin has found something like a regional bottom; but on the other hand, there is also a high level of risk buying an asset that has little market confidence. We should of course note that, in spite of the relative levels respective to each side’s history, longs are still generally quite a bit higher than shorts in real terms.
Finally, in what has become a rather new segment here, we see that Bitcoin and gold are still mostly correlated to traditional assets. Everything has felt the squeeze in the aftermath of the economic damage caused by COVID-19, and the damage is likely to continue for a while.
But the correlation seems to be, perhaps, separating a little. In the last week we have seen traditional equities hold their values while Bitcoin and – especially – gold have cooled off. There might be some inverse correlation developing, but it is at any rate a mild trend at best so far.
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