Analytical review. Weekly 28.06.2021

This week, the already protracted period of market consolidation continued. At the beginning of the week, there was a drop. As a result, the total capitalization fell by 23%, reaching a local minimum of USD 1.16 trillion. The market rebounded mid-week level with a 22.2% gain but never returned to its opening levels. At the moment, the total capitalization is near the maximum of the mid-week — 1.38 trillion USD.

Weekly price charts of market dominants — BTC and ETH (aggregate share in total cryptocurrency capitalization — about 63%) have certain similarities between them: a drop in the beginning (a slightly more substantial drop for ETH), recovery in the middle of the week, then another fall and the final fixation near the maximum of the recovery cycle. In the case of BTC, the critical support level of 28 800 USD was not broken, and by the end of the week, the price reached 34 890 USD. The cost of ETH by the end of the week was slightly above 2000 (2058 USD), consolidating just below the week’s opening level.

Analysis of cryptocurrency financial flows between exchanges, smart contracts, and users shows some changes compared to last week. The number of stablecoins on both centralized and decentralized exchanges increased, while the ETH number on the exchanges mentions above decreased decently. This situation may indicate that some users were buying ETH and other altcoins at this week’s lows. Nevertheless, large amounts of stablecoins continue to remain in both large and small wallets, an indicator that many holders prefer to wait out the period of uncertainty, avoiding active trading and investment transactions. In the case of BTC, the bulk continues to remain in small wallets, and there are no significant changes in the distribution structure compared to last week (+ 10% in small wallets, — 7.5% on Binance), the amount of BTC in the wallets of “whales” did not change.

Open interest levels in BTC and ETH futures reached monthly lows in terms of trading volume this week. As the price rose, demand recovered somewhat for both assets. In BTC, the more substantial drop in trading volume was due to several negative news stories centered specifically around BTC.

The ban on mining and cryptocurrency transactions for central banks in China led to a record 35% drop in the bitcoin network hash rate to 65 EH/s. The last time such a low hash rate was recorded was in December 2019.

As we can see, the decline in some popular pools exceeds 90%. The reduction should stop after miners migrate to other jurisdictions, but how soon it will happen in sufficient volume to restore the hash rate is difficult to predict.

The U.S. Securities and Exchange Commission (SEC) has once again postponed its consideration of whether to allow or ban bitcoin-ETFs. Also, due to the regulator’s claims, the IPO of Robinhood, a notorious company that recently began providing its clients with some crypto-assets trading services, has been delayed.

While the world’s first economy’s financial regulator is trying its best to delay the legalization (at least partial) of cryptocurrencies, developing countries in Latin America are not wasting time. Thus, after El Salvador, the second country where bitcoin may recognize as a means of payment could be Paraguay. This week the deputy Carlos Rejala proclaimed that he would initiate a bill to legalize bitcoin in the National Parliament. The bill is expecting to publish on July 14. However, unlike El Salvador, where the President initiated the bill, in the Paraguayan Parliament, Carlos Rejala holds one of his small party seats (in total, there are 80 deputies). Although voting may delay the bill and procedure cannot accurately predict the outcome, the precedent itself is hugely positive.

Legislative initiatives regarding the regulation and legalization of cryptocurrencies are also taking place in Latin America’s largest economy, Brazil, which is currently experiencing a crypto boom. There is also an increasing interest from Mexican bankers.

It is worth mentioning the launch of Andreessen Horowitz’s third crypto fund of 2.2B USD and the growing pursuit of talent among prominent Wall Street employers.

The redistribution of assets in possession continues in the BTC market. Last week’s decline was even more detrimental than May’s decline. According to the latest analysis, short-term owners, many of whom entered the market with leverage, have locked in some (possibly significant) part of their losses. At the same time, long-term holders who entered the market no higher than 12 000 or more than 12 months ago continue to hold BTC on their balance sheets. They have sold no more than the equivalent of 300M at this point, which is a relatively insignificant portion of their total balances.

At the same time, a price point near 30 000 is beginning to affect some of the long-term owners’ purchases, moving that part into the loss zone. Even though this process does not affect more than 2.5% of balances, a drop below the 25 000 marks could lead to a series of forced or emotional sales. This situation, hypothetically, could bring the price even lower.

In general, despite the decline in volatility and price, the overall market situation continues to develop in the paradigm of accepting the new reality, where BTC and other cryptocurrencies are becoming an integral part of finance and the economy as a whole.

After the large-scale execution of contracts last week, the size of concluded deals is in no hurry to recover. At the moment, the volume of trades in options approximately corresponds to the beginning of the year. The primary importance of interest is concentrated in contracts with an execution date at the end of December.

For the next six months, we can note historically established levels of consolidated trader interest. For BTC, they are 20 000 marks, a zone from 24 000 to 28 000, 30 000 and 32 000 for the lower range, and 40 000, 50 000, and 60 000 marks as reference points of possible growth. Within a month, the supporting levels will be 20 000, 25 000, 30 000, and 32 000 for the lower range. Within a month, possible support levels are 20,000, 25,000, and 28 000–32 000 zone. Resistance levels stay at 40 000, 45 000, and 50 000.

A similar situation is in the Ethereum market. After closing more than 40% of open trades, the volume of open positions remains relatively low. Global levels of market interest are at 1650, 1850, 2200–2600 zone, 3000, and 5000. Local support levels correspond to 1500, 1600, and 1800 (coinciding with the possible levels of mass liquidations in the Maker, Compound DeFi protocols). Resistance levels locating at 2400, 2600–2800, 3000, 4000, and 5000.

Some of the local levels are inheriting by the market from the spring growth, but the execution of transactions last week leaves enough room for price and trading volume growth. Upcoming network updates (Taproot and EIP 1559, especially Ethereum update) can serve as a strong driver for crypto market growth shortly.

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