Cryptocurrency prices may continue to drop during the historically weak summer period
Over the past week, the crypto market has been in an almost “clean” sideways movement, with no noticeable volatility. The total crypto market capitalisation index started the week at $1.268 trillion, dropping to a midweek high of $1.212 trillion. The week ended at $1.285 trillion (up 1.34% in total for the week).
Bitcoin, which returned to its October 2021 performance in terms of the dominance index (44.91%), temporarily consolidated around the fundamental 30 000 level, starting and ending the week almost at the same level, with a local dip to 28 680 mid-week.
Etherium — an identical pattern. It started the week at just above 2000 and finished at the same level, ending almost unchanged over the period (except a midweek drop to 1910).
News
OpenSea, the popular NFT marketplace, has launched a new protocol for buying and selling NFTs. The news, which first came to light earlier on Friday, has been confirmed by the company itself. The protocol, named Seaport, allows users to purchase NFTs in a variety of new ways. Traders who use Seaport can aggregate different assets in exchange for NFTs, as opposed to the standard scheme where NFTs can only be exchanged for interchangeable tokens. For example, an NFT that is valued at 100 ETH can be exchanged for an NFT that is valued at 40 ETH and 60 ETH directly in tokens.
Pantera Capital, a major backer of Terraform Labs, cashed in almost 80% of its investment in Terra (LUNA) well before the TerraUSD (UST) collapse last week. Pantera Capital has invested in Terraform Labs at least twice — once backing a $25 million round in January 2021 and then joining a $150 million ecosystem fund round in July 2021. As Pantera exited most of its investment in the early stages, it made a significant profit. The firm turned $1.7 million into about $170 million. At the same time, other investors backing Terraform suffered huge losses as Terra’s native LUNA token lost almost all of its value due to the loss of the UST’s dollar peg.
Video game retailer GameStop has announced the launch of a wallet for cryptocurrencies and NFT. The non-custodial Ethereum wallet will allow gamers and other users to store, send, receive and use cryptocurrencies and NFTs in decentralised applications. The solution will also allow efficient interaction with its own NFT marketplace, which GameStop is building in partnership with Immutable X. Fintech company Revolut also announced plans this week to create its own Web3 wallet.
Andreessen Horowitz is launching a new fund focused exclusively on new opportunities in the gaming industry. The new $600 million fund is an endowment pool and a new internal division. “Games Fund One” joins a16z’s other industry divisions, including the crypto and bio divisions. The fund is led by general partners Andrew Chen, John Lai and James Gwertzman. Fund sponsors include a number of executives from the games industry, including co-founders of King, Discord, Roblox, Zynga, Twitch, Blizzard and Riot Games.
Market conditions
The consolidation phase, which has been going on for about two weeks now, could last for quite some time. The next major events — the Fed and central bank meetings in Europe and England — are scheduled for mid-June. Until then only breaking news related to hacking protocols or disabling any blockchain is possible.
In such a situation, traders’ attention is often drawn to potential “leading” indicators that can help more accurately predict global trend changes. One such way is to compare Bitcoin and Ethereum’s dominance in the overall market capitalisation of cryptocurrencies. Historically, an increase in Ether’s dominance index while Bitcoin’s dominance is decreasing reflects the risk appetite of market participants. Based on Glassnode’s analytics, the market is currently in an established bearish cycle. For a trend reversal to occur, Bitcoin’s dominance must increase significantly, which in turn requires either a decrease in correlation with traditional markets or an improvement in the global economic environment.
Caution and restraint prevail in the options market. Traders try not to trade long-range strikes, not expecting a significant surge in Bitcoin volatility in the short term.
Within block option trading strategies, the main strategies were related to the use of put spreads and diagonal (calendar) put spreads with short execution dates and strike prices. Fears of further price declines persist in the market and are reflected in the strategies chosen.
Despite the decline in volatility and market consolidation, the market situation remains rather turbulent. Many indicators point to continued strong bearish sentiment, which does not rule out the likelihood of further price declines during the historically weak summer period.
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