Crypto Market Review, Nov. 24

Ethereum has been stagnating on the market in the last 12 days, most likely because of nonexistent derivatives open interest and a high level of fear among retail traders and investors. However, things may change next week, and here’s why.

Three sources of action

The first factor that investors should consider as a potential source of volatility for Ethereum next week is the asset’s historical volatility. According to the indicator, Ether’s volatility plunged to the lowest level in a month, which might cause an upward reversal for the asset’s volatility in the next week.

In the technical analysis, unusually suppressed volatility is a sign of an upcoming surge in either direction for an asset. Unfortunately, volatility-based indicators cannot be used for forecasting the direction in which assets will move in the foreseeable future.

However, unusually low volatility is not the only thing investors should keep an eye on. On Nov. 30, the CEO of the notorious FTX exchange will speak out on the DealBook Summit. While SBF’s appearance at the event is already exciting news, investors should be ready for a sudden volatility spike caused by the breakthroughs Bankman-Fried may bring with himself to the event.

Ethereum was one of the largest holdings of FTX, which is also why the second biggest cryptocurrency on the market faced selling pressure as soon as panic emerged on the market.

Apart from Ethereum’s low volatility and SBF’s upcoming performance, open interest is yet another factor we should keep our eyes on. Derivatives are the main source of volatility and price action for any asset on the cryptocurrency market.

The volume difference between the spot and derivatives markets for assets like Ethereum and Bitcoin is massive, which is why futures, options and other financial subproducts are considered the main driver of the market.

Recently, Ethereum derivatives open interest reached a one-month low, suggesting that investors are still too afraid to gain leveraged exposure to the asset. However, such low open interest is mostly temporary, especially by the end of the month.

Bitcoin might face some selling pressure

If we exclude the FTX catastrophe from history, all macro indicators have been hinting at the recovery of high-risk assets, including Bitcoin. The chart of the U.S. dollar confirms this thesis.

Compared to a bracket of foreign currencies, USD lost more than 7% of its value in the last 40 days. The growth of alternative investment tools like gold shows how important the weak USD is for all kinds of assets. With less attractive rates and the weak performance of the biggest currency in the world, investors tend to look for alternative ways of investing their funds.

However, the cryptocurrency industry will not gain anything from the weakness of the U.S. currency due to the trust crisis among institutional investors, who will think twice before returning to the digital assets industry after the crash of FTX.