New trends in the crypto market

The Bybit exchange has released a new report regarding current trends in the crypto market.

New Bybit exchange report on crypto market trends

What are the new trends in the crypto market and how is the market doing after going through one of the most difficult times in its entire history? These are some of the questions addressed in Bybit and Nansen’s new report on the state of the crypto industry.

One of the first aspects that the report dwells on is the merciless analysis of the huge loss of capitalization, on the order of 67% in the last seven months, due to the big drops in the market, which have seen all cryptocurrencies plummet from their November highs by 60 to 80% of their value. 

The beginning of the report reads:

“During the broader market sell-off in June, Bitcoin retracted due to the surging market share of stablecoins. This potentially signaled that the flight-to-safety period had ended, and the market had officially entered the capitulation phase.”

June shows how the Fear and Greed index signaled a feeling of extreme fear in the market. In early July, the index reached its lowest level since September 2019, before rebounding slightly in the following days, although its level still remains very low, given the difficult economic situation that also impacts cryptocurrency markets, which increasingly seem to be following a correlation with traditional markets, especially that of Nasdaq technology stocks.

Bybit and Nansen experts explain:

“The 30D correlation between equities and BTC decoupled to 0.5 in July for the first time since March this year, but resumed to an elevated level in August. With the Nasdaq 100 index rebounding 19% from its lows at the time of writing, a correction may likely lie ahead in the short term, indirectly posing headwinds for the cryptocurrency.”

Factors affecting crypto market performance

According to the experts who authored the report, the July-August rebound was driven by futures and options, while spot trading volume seems to have behaved rather volatile. Another aspect that is highlighted by the report is the impact that the upcoming Merge update for the Ethereum blockchain may have, which is expected to have a strong impact on the entire cryptocurrency market.

The experts then continue:

“Most Ether options expired in September, revealing that most trades seem to have bet on The Merge and could possibly realize profits any time before the highly anticipated upgrade event.”

Another factor that is attracting the attention of many investors is that inherent in the stablecoin market, which has been hard hit by the failure of the Terra ecosystem and its UST algorithmic stable, which has rattled the entire industry for days. Recent stablecoin movements and technical indicators seem to point to a market trend turnaround.

August saw stronger outflows ($1 billion) than inflows ($2.1 billion and $1.4 billion in June and July, respectively) for the first time since May. The shift from inflows to outflows could indicate an early sign of a turnaround, in which capital may be returning to the DeFi space from the major exchanges after the capital flight of the past three months.

The performance of the NFT sector

The report then turns to the state of the NFT market, which after booming in 2021 has slowed down sharply in the first 8 months of 2022. The decline in NFTs continues to remain very high in August. While the market is bearish, NFTs have underperformed Ether in dollar terms since the beginning of the year for the first time this year. Due to the collapse in minimum NFT prices, the market has seen a drop in the number of first-time buyers while the number of return buyers remains high.

The report then looks specifically at the correlation that has occurred between the NFT market and the performance of Bitcoin and Ethereum:

“Following the recent broader price correction, NFT correlations with BTC have spiraled in terms of both Ether and dollars. The repeating pattern where NFT correlations with BTC soar when Bitcoin plunges, and drops when the price rebounds or is range-bound, further affirms what we covered in the previous month’s report, that NFTs are not a good hedge against Bitcoin.”