• Wed. Feb 28th, 2024

Crypto traders avoid risk and shelter in stablecoins when market reaches a turning point

Crypto traders avoid risk and shelter in stablecoins when market reaches a turning point

Glassnode, an on-chain analytics firm, published a report indicating that investors are shifting capital to risk-free assets such as stablecoins and bitcoin. Technical experts show that altcoins are at a critical turning point between positive and negative breakout.

Glassnode’s analysis of uniswap and futures trading volumes revealed that the rally that started in the first quarter of 2023 started to cool in April, as regulatory concerns and a lack of liquidity encouraged risk-on tendencies among traders.

The report stated that while memecoins appear to have caused a surge in Uniswap’s trading volume, a closer look at Uniswap’s pools reveals that the majority of the volume is for the top cryptocurrencies, BTC, Ether (ETH) and stablecoins.

Additionally, sandwich attacks and bot trading accounted for a significant amount of this trading activity. The report reads:

“If we take into account that many bots engage in arbitrage or sandwich attacks, the amount of ‘organic’ trading volume on Uniswap accounts for two-thirds of all DEX activity.”

Ether’s futures trading volume on centralized exchanges shrank in May, with the 30-day average trading volume falling to $12 billion a day versus $21.5 billion a year.

Glassnode analysts noted that the decline in futures trading volumes is a sign that “institutional trading interest and liquidity remain very weak.”

Similarly, the market share for Bitcoin (BTC) Perpetuals and their Ether counterparts shows a large discrepancy, with Bitcoin dominating at 65.5%. In 2022, both assets had equal shares in the perpetual swap space. However, this trend changed significantly last year.

BTC vs ETH Perpetual Volume Domination. Source: Glassnode

Tether (USDT) absorbed a significant proportion of the flow from Binance USD (BUSD) and Circle’s USD Coin (USDC), bringing USDT to an all-time high of $83.1 billion.

In the crypto market, capital usually flows from majors like Bitcoin and Ether to altcoins. However, recently, the above trends show that capital rotation is moving away from high-risk altcoins to low-risk assets such as stablecoins and bitcoin.

Bitcoin’s relative strength and altcoin price momentum

Technically, Bitcoin’s dominance percentage over the crypto market, which measures the share of Bitcoin’s market capitalization in the total crypto valuation, experienced an upswing in 2023 before meeting resistance at the 48.35% level.

If Bitcoin buyers can’t overcome this resistance, the market can expect the altcoin to rally relative to Bitcoin.

Bitcoin dominates the crypto market. Source: TradingView

On the other hand, the TOTAL2 chart, which measures the market capitalization of the cryptocurrency market excluding Bitcoin, reversed its positive breakout from the triangle pattern and pushed the index back into a triangle pattern that started forming in October 2022.

Related: Ethereum Gas Fees Cool After May Memecoin Madness

Currently, the total market cap of altcoins is bound by a bearish descending triangle pattern with lower highs and a parallel support level of $433.39 billion. Sales are likely to fall below this level.

Market capitalization of cryptocurrencies other than Bitcoin. Source: TradingView

If buyers continue to build support above the parallel resistance at $616.35 billion through the weekly closing, altcoins could continue higher for the next few weeks.

This article is for general information purposes and is not intended to be taken as legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment or trading move involves risk, and readers should do their own research when making a decision.

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