Crypto settlements: risk avoided

During the just ended weekend there was a risk of massive sell-offs in the crypto markets.

According to some predictions, it was thought that liquidations worth several hundred million dollars were imminent.

The narrowly averted risk and the level of crypto liquidations

Such predictions were based on the performance of the crypto markets in the previous weekend.

Indeed, on Friday 19th the price of Bitcoin had dropped below $60,000, but then recovered the following day after the halving had occurred.

On the same day the price of Ethereum had even dropped below $2,900, but then recovered on Saturday 20 thanks to the recovery of Bitcoin.

These levels were not reached again during the following weekdays, so some were expecting a possible retest during the just ended weekend.

According to some estimates, a return of the ETH price well below $3,100 would have been enough to trigger a significant amount of automatic liquidations of leveraged long positions, and if the price had also dropped well below $3,000, the liquidations could have exceeded $500 million.

Instead, over the weekend the price of ETH never dropped below $3,070, a level sufficient to prevent the majority of liquidations.

However, given that the first price level that would have triggered the first large batch of automatic liquidations seemed to be at $3,060, the danger was narrowly avoided, even though the bulk of the liquidations would have only occurred with a sharp drop below $3,000.

Ethereum recovery: crypto liquidations stop

Staying on ETH, optimistic hypotheses have been circulating for a few days, actually confirmed yesterday by the narrowly escaped danger.

A particularly interesting piece of data is the one related to the price of ETH expressed in Bitcoin.

At this moment 1 ETH is worth about 0.05 BTC, but a couple of weeks ago it had dropped below 0.047 BTC.

It is worth noting that the descent that seemed to have ended in mid-April had started at the beginning of March, and was part of a broader medium-long term trend that had actually started at the end of September 2022 after the switch to Proof-of-Stake.

The point is that what is happening in the last two weeks could mark a real change in trend, on the medium-short term, because the price of Bitcoin does not seem to have the strength to rise much, while that of ETH does.

It should not be forgotten that Ethereum is still down -35% from its all-time highs in 2021, while BTC has significantly surpassed them in March.

Although there are several hypotheses circulating regarding a possible rise in the price of ETH, especially when expressed in BTC, at this moment these hypotheses do not concern the possibility of reaching new all-time highs, nor even returning to $4,000.

Since the crypto markets seem relatively stable at the moment, it is hypothesized that it could simply return to mid-April levels.

The lateralization of Bitcoin

As for BTC, during last week, including the weekend, the price never dropped below $62,000.

Since a return below $60,000 was needed to trigger the bulk of the settlements, the danger was easily averted.

However, at this moment the price of Bitcoin seems to have entered a new phase of sideways movement, which started the week before the halving, during which the price is fluctuating within a fairly narrow range, between $60,000 and $67,000, with occasional excursions above and below these thresholds.

In other words, the $59,000 is acting as support, and perhaps only a break below that support could change the trend. Instead, the main resistance seems to be at $68,000, a figure that is actually a bit far from current values.

Despite everything currently seeming to be proceeding in a sideways manner, there is a possible game-changer that could change things in the short term: the launch of ETFs in Hong Kong.

Tomorrow, Tuesday, April 30, 2024, the first BTC and ETH spot ETFs authorized in China are expected to debut on the Hong Kong stock exchange.

However, there is not great anticipation about it, because non-resident Chinese in Hong Kong will not be allowed to purchase them.

Although the Hong Kong stock exchange is technically a Chinese stock exchange, it is actually mainly aimed at foreign investors and speculators, while the largest Chinese stock exchange serving the domestic market is the one in Shanghai.

The new ETFs will be launched only on the Hong Kong stock exchange, which does not serve the vast Chinese domestic market. This could also mean that tomorrow’s launch may not have any significant impact on the crypto markets.

The problem of May

All this is added to the fact that May is often not a particularly positive month in the financial markets.

For example, in 2021 the price of Bitcoin, after the first phase of the bull run ended in mid-April, dropped from $60,000 to $30,000, although this drop was amplified by the Chinese ban on crypto exchanges.

Moreover, May is often a negative month not only for crypto markets, but also for traditional ones.

It is therefore not surprising that there are not many who are betting on a recovery of the crypto markets in May 2024, although there is still optimism among crypto investors and speculators.

This apparent paradox is well summarized by short-term forecasts on the price of Ethereum, which turn out to be positive but not too much.

It may also take one or two weeks before the situation becomes completely clear, so May may start relatively well and then possibly worsen in the second part.