According to a recent report from on-chain analytics firm Glassnode, investors are increasingly directing their capital towards low-risk assets such as stablecoins and Bitcoin. The report suggests that technicals indicate altcoins are currently at a critical turning point, poised to experience either a positive or negative breakout.
Glassnode’s analysis of Uniswap and futures trading volumes suggests that the uptrend that began in Q1 of 2023 has cooled off since April, with regulatory concerns and a lack of liquidity contributing to risk-off tendencies among traders. Although it may seem that memecoins are driving Uniswap’s trading volume, the majority of volume is actually for top cryptocurrencies like Wrapped BTC, Ether, and stablecoins. The report also notes that sandwich attacks and bot trading account for a significant portion of Uniswap’s trading activity.
Weak Institutional Trading Interest and Liquidity
Futures trading volumes for Ether on centralized exchanges contracted in May, with 30-day average trading volumes dropping to $12 billion per day, compared to a yearly average of $21.5 billion. Glassnode analysts suggest that this decline is a sign that institutional trading interest and liquidity remain weak.
Similarly, Bitcoin’s market share for perpetuals versus Ether counterparts is currently at 65.5%, indicating a significant discrepancy. In 2022, both assets had equal shares in the perpetual swap space, but the trend has shifted over the past year.
Tether has absorbed a significant proportion of outflows from Binance USD and Circle’s USD Coin, pushing USDT to a new all-time high supply of $83.1 billion.
Technical Analysis
Glassnode’s report also includes technical analysis, suggesting that Bitcoin’s dominance percentage over the crypto market experienced an uptrend in 2023 before encountering resistance at the 48.35% level. If Bitcoin buyers are unable to break out above this resistance, the market can expect an altcoin rally relative to Bitcoin.
On the other hand, the TOTAL2 chart, which measures the market capitalization of the cryptocurrency market excluding Bitcoin, had its positive breakout from the triangle pattern reversed, pushing the index back into a bearish triangle pattern that started forming in October 2022. Currently, the total market capitalization of altcoins is bound by a bearish descending triangle pattern with lower highs and a parallel support level of $433.39 billion. If selling accelerates below this level, it could lead to further declines in altcoins.
However, if buyers push higher by building support above the parallel resistance at $616.35 billion by weekly closing, altcoins could continue to head higher over the next few weeks.
In summary, Glassnode’s report suggests that recent trends indicate a shift in investor sentiment towards low-risk assets like stablecoins and Bitcoin. Technical analysis shows that altcoins are at a crucial turning point, with potential for either a positive or negative breakout.
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