First Mover Asia: Bitcoin Dominates but Altcoins Lurk

Good morning. Here’s what’s happening:

Prices: Bitcoin rises but remains below $30,000.

Insights: Bitcoin dominance is at an on-year high, but traders are preparing another alt-season.

Technician’s take: Technical indicators are neutral and upside appears limited from here.

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Prices

Bitcoin (BTC): $29,672 +2%

Ether (ETH): $1,978 +0.4%

Bitcoin fares better than other major cryptos

Bitcoin wasn’t going anywhere fast late Tuesday.

The largest cryptocurrency was up slightly but still trading below $30,000 and about midway in the two thousand dollar range that it’s occupied for almost two weeks since the crash of the UST stablecoin. Other major cryptos also rallied late to hit green, albeit not by much, as investors gripped tightly to their risk-averse bearishness.

Near the time of publication, bitcoin was trading at about $29,700, a 2% gain. Ether, the second largest crypto by market cap, was recently up less than a percentage point, while XRP, SOL and the meme coin SHIB each rose over 1%. Bitcoin’s price has dropped for eight consecutive weeks.

“Bitcoin is in the danger zone as sentiment for risky assets have fallen off a cliff,” Oanda Senior Market Analyst The Americas Edward Moya wrote.

Macroeconomic news offered little encouragement for investors.

Stocks about-faced from their healthy Monday gains after social media platform Snap Inc. (SNAP) issued a profit and earnings warning that swept up the tech sector, and the U.S. Commerce Department reported that new home sales plummeted 17% in April to hit a two-year low. The tech-focused tech-focused Nasdaq plunged 2.3%. The S&P 500 also fell, albeit more moderately.

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.”

Markets

S&P 500: 3,941 -0.8%

DJIA: 31,928 +0.1%

Nasdaq: 11,264 -2.3%

Gold: 1,866 +0.6%

Insights

Bitcoin Dominance is at an on-year high, but traders are preparing for another alt-season

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.

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.

While Terra’s collapse leaves many with existential questions about the future of crypto and DeFi as an investment vehicle, traders appear to be preparing to return to altcoins, with data suggesting that bitcoin’s dominance might be short-lived.

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.

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

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.

The fact that so much wealth vanished in the last two weeks is going to give many traders pause, especially as institutional investors lost billions of dollars. But we are seeing that conviction remains in the asset class, even as it’s tested time and time again.

Technician’s take

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

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.

The relative strength index (RSI) on the daily chart is rising from oversold levels, but remains capped below the 50 neutral mark. A move above 50 in the daily RSI would confirm a brief recovery in price. For now, upside appears to be limited, initially toward the $33,000-$35,000 resistance zone.

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.

Important events

World Economic Forum

Blockchain & Sustainable Economic Growth conference

Nvidia second-quarter earnings

CoinDesk TV

In case you missed it, here is the most recent episode of “First Mover/” on CoinDesk TV:

Sending Decentralized Data Storage to Space, Buying Land in the Metaverse

Marta Belcher of Filecoin Foundation explained how her organization is teaming up with Lockheed Martin (LMT) to explore sending blockchain data to space. Plus, Josh Olszewicz of Valkyrie provided insights on crypto markets and Sam Hamilton of Decentraland Foundation discussed virtual land.

Headlines

At Davos, Crypto Is No Longer on the Outside: Cryptocurrencies have taken a prominent role at the World Economic Forum’s annual meeting in Davos, despite the mainstream finance world’s apparent contempt for the sector.

South Korean Authorities Look to More Closely Scrutinize Exchanges Following Terra Meltdown: Report: Around 280,000 South Koreans are believed to have been victims of the abrupt plunge in UST and LUNA.

LUNA’s Ghost Haunts ‘Permissionless’ Crypto Conference: At the first industry conference since Terra’s $40 billion collapse, companies and investors say crypto could face a more uncertain future.

Bitcoin Records Eighth Week of Losses, but Sentiment Indicator Suggests Upside: Sentiment indicators reached “rock bottom” on Monday amid a prominent fund manager calling for a retest of 2019’s price levels.

Climate Company Flowcarbon Raises $70M Through A16z-Led Round, Sale of Carbon-Backed Token: Flowcarbon aims to drive investment in projects that remove carbon from the atmosphere by creating a protocol that tokenizes carbon credits.

Longer reads

Martin Shkreli Is Back. He Loves Crypto: The flawed former hedge fund manager is looking to reinvent himself as a crypto entrepreneur. Buyer beware.

Today’s crypto explainer: What Is a Satoshi? Understanding the Smallest Unit of Bitcoin

Other voices: Welcome to the Zombie Cryptocalypse(Wired)

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)