First Mover Asia: Bitcoin Dominates but Altcoins Lurk

Macroeconomic news offered little encouragement for investors.

Snap shares declined over 40% from their Monday close after the company said its revenue and profit would miss earlier projections for its second quarter, a victim of inflationary pressures and macroeconomic turmoil. According to The Wall Street Journal, the company's CEO, Evan Spiegel, said in a presentation prior to the warning that he had asked managers to look for cost savings. Tech giants Meta (FB) and Google (GOOG) dropped about 7% and 5% respectively

The housing report reflected the impact of rising mortgage rates on would-be home buyers who are now priced out of loans they might have afforded when borrowing costs were lower earlier in the year. Meanwhile, the manufacturing and service purchasing managers index dropped to three- and four-month lows, primarily victims of rising prices.

In the smallest sliver of good news, the bitcoin Fear & Greed Index, which has been stuck in "fear" zone over the past month and reached its second-lowest recorded fear level in the index's history last week, has improved slightly the past few days, suggesting bearish sentiment could diminish, particularly if bitcoin crosses $30,000.

But Oanda's Moya noted that even falling Treasury yields, "which makes crypto attractive," have failed to move investors. "Right now, no one wants to buy this dip," he wrote, adding that bitcoin could test support just above $25,000 and that $20,000 remains a possibility. "Bitcoin can't stabilize until Wall Street sees calm and that might not happen for a little while longer."

As bitcoin continues to trade comfortably within the $30,000 range, data shows the cryptocurrency’s dominance of the digital asset market has shot upward and is now just under 45% of total market capitalization, a high for the year.

Insights

Bitcoin’s dominance of the broader crypto market cap reflects traders’ risk tolerance and market sentiment. When conditions turn bullish, traders move capital into Ethereum and other layer 1, or base, blockchains in order to take advantage of the decentralized finance (DeFi) market. Likewise, a bearish market brings back traders into the safe haven of bitcoin, crypto’s "digital gold."

With the implosion of the Terra ecosystem, many layer 1s have been hit hard: Solana is down 50% during the last month, Avalanche is down 60% during the same period, and Polygon lost just over 53% of its value.

According to CoinGlass, funding rates for ether and major alts are working in the favor of long traders. Funding rates are turning negative, which means that short sellers are being liquidated in favor of those with long positions.

With the implosion of the Terra ecosystem, many layer 1s have been hit hard: Solana is down 50% during the last month, Avalanche is down 60% during the same period, and Polygon lost just over 53% of its value.

There’s still a long way to go before we can declare another season of the alts, despite a few green sprouts. The total value locked into DeFi protocols, the vehicle in which many alts are used, doesn’t show any signs of improvement.

DeFiLlama has the total locked-in value at $111 billion, down from around $205 billion at the start of the month, before Terra’s planetary collapse, and well below the $250 billion in DeFi in December of last year.

Likewise, the ratio of long positions to short has moved in favor of longs for ether, DOT and SOL as per CoinGlass’ data.

Bitcoin Range-Bound; Support at $27K, Resistance at $33K

DeFiLlama has the total locked-in value at $111 billion, down from around $205 billion at the start of the month, before Terra’s planetary collapse, and well below the $250 billion in DeFi in December of last year.

Bitcoin (BTC) continues to trade in a tight range, struggling to make a decisive break above or below $30,000. The cryptocurrency found support around $27,500, which has stabilized price action over the past week.

Technician's take

Bitcoin Range-Bound; Support at $27K, Resistance at $33K

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Momentum signals are improving on the daily chart, but remain negative on the weekly and monthly charts. That could increase the risk of a breakdown in price, similar to what occurred in earlier this month.

Said and heard

“They got Ukraine wrong, they got the West wrong, they basically got everything wrong. We diplomats of the Foreign Ministry are also at fault for this, for not passing along the information that we should have – for smoothing it out and presenting it as though everything was great.” (Russian diplomat Boris Bondarev referring to his country's invasion of Ukraine in The New York Times) ... "Yet, bitcoin and the larger crypto industry could largely be described as an experiment with liberalism. That’s the "lowercase l" variety, or the political philosophy that takes an expansive view of individual rights and equality." (CoinDesk columnist Daniel Kuhn) ... "In some sense, the hyperreal isn’t just a goal but potentially a necessary end state of the metaverse. Scaling immersive digital experiences to billions of people will only be possible when content creation is automated with artificial intelligence (AI)." (CoinDesk contributor and Metaphysic co-founder and CEO Tom Graham)