Crypto market sentiment remains depressed, but ETH and DeFi show strength | Trading Ideas| OKEx Academy

BTC ended a flat week, but ETH saw a major breakout as DeFi is gaining strength — Market Watch Weekly 

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BTC experienced another flat week with prices oscillating around 36,000 USDT levels, as per the OKEx spot price. The market leader reaped a 2.75% weekly gain, but it is still not out of the sideways range. No further news was released on the Chinese regulatory front, and the market’s fears have been eased to some extent. This also led to a gradual decline in BTC options implied volatility, especially for the short to medium term. 

BTC experienced another flat week. Source: TradingView

As of Monday, however, Bitcoin has been running below its 200-day moving average for 20 days, and the price is moving further away from this bull/bear threshold. According to data from Glassnode, Bitcoin’s number of active addresses has hit a year-to-date low, another indicator of weakening market sentiment.

Bitcoin’s number of active addresses hit a year-to-day low. Source: Glassnode

Institutions are still not optimistic about the post-market

On the institutional side, CME updated the latest (as of June 1) Bitcoin futures position data on June 5. In this reporting period, BTC saw a slight retreat, but the decline was limited due to reduced market volatility. This market condition also gives us a glimpse of institutional investors’ inclination toward the post-market.

The open interest during this time saw a huge decline from 9,376 to 7,318 contracts (with a standard contract being 5 BTC). The OI hit a 57-week low, indicating that institutional sentiment is also cooling down. This also shows that the Black Wednesday crash has had an extremely serious impact on both institutions and retail investors.

Meanwhile, asset-manager accounts saw their long positions decrease from 465 to 407 contracts, while their short positions dropped from 651 to 619 contracts. The continued decline in total positions indicates that the expectations for further gains are not very strong among asset managers.

Leveraged funds decreased their long positions from 2,231 to 2,081 contracts, while short positions went down from 5,770 to 4,949 contracts. With another cut in both directions, it would appear that leveraged funds have not chosen a direction but managed to control risks by reducing their positions. 

CME Bitcoin futures data — open interest. Source: Quandl

ETH shows bullish momentum

Due to the lackluster performance of BTC, old names also failed to show any strength, with BCH, EOS and ETC underperforming the market leader. On the other hand, SOL, the native token of Solana, and OKB, the exchange token of OKEx, jumped 51% and 26%, respectively, leading the major altcoins sector. 

The Altcoin Season Index from BlockchainCenter hovered at a high of 88, showing the resilience of the major altcoins. Over the same period, Bitcoin dominance saw another 5% weekly retracement from 44% to less than 42%, as per data from TradingView. 

Weekly returns of major altcoins, 5/31 to 6/6. Source: TradingView

ETH, which is set to receive a major upgrade in the summer, has shown a stronger rebound of 17% over the last week. The ETH/BTC pair made a breakout from the 0.074 resistance level, and this new bullish momentum could bring the second-largest cryptocurrency to test mid-May’s high of 0.082.

ETH/BTC made a major breakout last week. Source: TradingView

DeFi powers on

The total value locked in DeFi, denominated in USD, bottomed out from the end of May’s $60 billion to the current $67 billion, and ETH locked in DeFi saw a slight increase from 9.56 million to 9.74 million, according to data from DeFi Pulse. Meanwhile, Ethereum’s average gas price hit a one-year low of 19 gwei per data from Etherscan. 

Aave ranked as the biggest protocol for the second week with a $9.84 billion TVL, followed by Maker’s $8.92 billion and Compound’s $7.68 billion. 

Total value locked in DeFi. Source: DeFi Pulse

Decentralized exchange Uniswap deployed its V3 on the Arbitrum mainnet last week, which is going to make DeFi more accessible and less expensive for the masses. This Layer-2 solution clearly put a lot of pressure on Ethereum sidechains, as the price of MATIC plummeted 8% over the week. 

The best-performing DeFi token in the week was CRV with a 52% weekly return, as Convex Finance provided Curve LP yield farmers a new incentive in the form of the CVX token. This triggered a shortage on the supply side, with borrowing rates for CRV on Aave once soaring above 150% last week, and the figure stands at 40% today, Monday. 

Weekly returns of major DeFi tokens, 5/31 to 6/6. Source: TradingView

Looking ahead this week 

Last week’s non-farm payrolls (employment figures) were significantly better than market expectations, and the three major U.S. stock indexes are just one step away from the previous highs.

The wait-and-see approach is still dominant, however, as the last Federal Reserve’s FOMC meeting before the summer break will be held on June 15–16. Whether the Fed will implement early tapering and rate hikes is the big question. Moreover, CPI data to be released this Thursday will be one of the important factors to consider.

Meanwhile, the Volatility Index again closed around the previous low of 15 to 16 over the last week, and the Dollar Index also bottomed out from the support at 89. In the next two weeks, investors need to pay close attention to these two figures because any major rebounds here will put pressure on risky assets, including cryptocurrencies.

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