Examining This Week’s Bitcoin and Altcoin Markets

Despite Silvergate's woes, investors remain positive about China's economy, which is expected to be positive.

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On-chain analysis suggests that the $25,000 resistance may be part of the transition out of the bear market, as Bitcoin and altcoins have struggled to break it. What does the market have in store for us?

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Scenes from the macro world

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In the wake of Silvergate Capital Corp.'s financial woes, the crypto-friendly US bank evaluates its future viability and the implications for the digital asset industry. Banks facilitate instant payments for crypto companies through their widespread payment networks. Silvergate is no longer supported or initiated by many digital asset exchanges, stablecoin providers, and trading platforms.

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After the FTX exchange collapsed in November, Silvergate's woes are only the latest manifestation of its ripple effect. Last year, FTX declared insolvency, causing a run on the bank's assets.

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Furthermore, the digital asset industry is under fire from the United States government, which is cracking down on regulation, and from the widespread perception that interest rates will remain high to combat inflation, dampening risk appetite. Meanwhile, investors prepare for Jerome Powell's hearing before a US Senate committee. A topic for discussion during the event will be the crypto industry, as it has been disclosed to the public.

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Jerome Powell, the chairman of the Federal Reserve, will give Congress a report on the US economy and monetary policy forecasts for the remainder of 2018. In the same way that Powell's previous comments have attracted significant attention from traders, the conference could also result in significant volatility.

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Price divergence between Bitcoin and the S&P 500

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FTX crash has been a crucial factor in the recovery of the crypto market, as Bitcoin's price has reestablished a high correlation with S&P 500 Index. Despite the otherwise optimistic atmosphere of the cryptocurrency market, the Silvergate crisis has had a noticeable effect on it. 

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Cryptocurrency rates have not shown signs of revival so far despite last week's stock market surge and the outbreak of Silvergate-related FUD, according to on-chain analytics. This is the highest level of divergence between the S&P 500 and Bitcoin price since November 2022's FTX meltdown.

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Therefore, if Powell makes reassuring remarks about signs of deflation or an economic rebound, stock markets and Bitcoin prices are likely to spike. Grayscale vs. SEC litigation will also weigh on the market.

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A Profit-Taking Metric Reveals Realized Prices

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In an attempt to understand the long-term value of Bitcoin investments, investors weigh the time value of money (TVM) of BTC investments in light of the Federal Reserve's interest rate hikes and high inflation. By averaging the purchase price of Bitcoin holders and grouping them by how long they've held the coins, it is possible to estimate TVM on-chain.

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A bear market in the early stages has led to an average actual price of over $21,000 for those who invested in Bitcoin (BTC) in the last six months. Bitcoin holders are also currently in profit as the average realized market price is $19,800.

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Bitcoin, on the other hand, has a realized price greater than the other market groups at $23,500 when it has been held for more than six months. The price rise of Bitcoin may make impatient investors impatient and push for a breakout when it reaches $23,500.

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Bottom and SPOR ratios of the market

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Bitcoin holders' long-term and short-term behavior can be analyzed with the SOPR Ratio. By dividing the SOPR of long-term holders by that of short-term holders, we can calculate the SOPR Ratio. As a result, we can observe that historically, after a market bottom, the ratio tends to range between 0.5 and 0.6 before rising again.

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We may have already hit the bottom of the market when the SOPR ratio reached 0.57 when the price of Bitcoin was 15790$ in November of last year, indicating that the worst price declines may have already ended. 

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For investors interested in entering the market or adding to their Bitcoin holdings, it is a positive signal. In spite of this, investors should always exercise caution and do their own research when it comes to investing in the crypto market, which is extremely volatile.

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Will Bitcoin price will mirror the April-June 2019 period?

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According to historical patterns, Bitcoin is likely to follow a similar trajectory between April 6, 2019, and June 26, 2019. Despite breaching its 365-day MA on January 29, 2019, the current MVRV behavior appears to be similar to April 6-25.

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In May or June 2023, Bitcoin's price could reach $30,000-$37,000 based on these parameters. What is the reason BTC can get a respite until then?

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It is important to take into consideration the failed attempt by the US Treasury to borrow $550B in Q4 2022, which resulted in nearly $200B being released into the market. December 2022 was a slow month for retail activity (Treasuries and MBS).

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Nearly $200 billion was released into circulation as a result of a discrepancy between estimates and actual sales. Eventually, borrowing will be necessary since the US Treasury's currency reserves are running low.

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As a result of the above situation, it is expected that the US may enter a recession in May-June, which may result in negative macroeconomic trends around the world. Due to its correlation with benchmark indices at crucial moments, Bitcoin may become a hostage during a downturn in the stock market. 

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It is thus possible that the current market could be a turning point for the cryptocurrency market as it mirrors the timeline of May-June 2019.

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Fiat On-Ramps in the Future

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Silvergate is in a dire situation. Coinbase, Paxos, Galaxy Digital, and other prominent cryptocurrency companies have severed ties with Silvergate after the "crypto bank" warned regulators it would soon be "less well capitalized." Is there anything to worry about? Since crypto markets began, they have been dealing with the "fiat dilemma." If you want to buy bitcoin, you will eventually have to deal with conventional financial systems. 

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By making conventional financial services accessible to crypto businesses, Silvergate overcame this problem. Silvergate's SEN instant payments network was extensively used by exchanges, market makers, and investors for quick currency transfers. 94 crypto exchanges and over 890 institutional investors were clients of the bank by the end of 2022.

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As SEN is one of the few fiat payment channels available to cryptocurrency, it could lead to a decrease in liquidity for the market. Now that Signature Bank is the only financial option available, it will be more difficult to deploy fiat capital via exchanges rapidly. Cryptocurrency stablecoins, however, provide another entry point into the world of decentralization.

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With its recent peak occurring after the FTX crash, dollar-to-tether trade volume has accelerated from 3% to 92% since 2017. It is likely that stablecoins will gain even more popularity in the trading community now that SEN is no longer an option.

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Stablecoin issuers issue stablecoins instead of CEXs; then, stablecoins are sent to the Exchange. The risk is even more centralized now that stablecoin issuers must use cryptocurrency banks.

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What do you think is the future of fiat currencies in cryptocurrency trading? The rise of stablecoins has resulted in fewer new currency trading pairs appearing on platforms around the world. Europe may offer opportunities as U.S. legal and financial climates deteriorate. A total of 365 new trading combinations denominated in euros were added in 2022, compared to 96 on all platforms in 2022.

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In an analysis of the dollar-denominated pairs, there is a larger narrative that emerges: the dollar's waning use in crypto.

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In comparison with USDT, USDC, and euro trading pairs, the USD market share has steadily declined since the FTX debacle. Dollars and dollar-pegged stablecoins are currently serving as the backbone of the crypto economy, but increasingly difficult USD payment channels could eventually change that.

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The market and the funding rate

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Funding rates of perpetual futures can often indicate market sentiment, leading traders to take short positions. Traders can predict market movements using this rate, which indicates whether they are bullish or bearish on Bitcoin.

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Bitcoin has never traded for a negative hourly value since December 2022, when it traded for around $6,000. Also, if we examine closely, most of the market bet on declines this year, mostly on local floors.

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Market bias has the opposite effect due to its contrary aspect. In the futures market, traders who use high leverage to gamble on a directional bias will typically experience a squeeze when the price shifts in the opposite direction. If leverage expansion and negative bets continue, there is a possibility of a price rebound pushed by cascading shorts liquidations.

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Are we on the verge of an optimistic narrative?

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Even after the price of Bitcoin temporarily declined on March 3rd and failed to reach $25,000 last month, on-chain statistics showed that these holders are still in profit. Market Value to Realized Value (MVRV) data shows that BTC is still in bullish territory. In general, investors who sell their holdings at the current price would make twice as much money if the MVRV ratio is positive for an asset.

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While Bitcoin's 2023 progress may have slowed in February and a number of obstacles remain, there are encouraging signs that suggest the market is nearing its end.