Profit-taking and Bitcoin consolidation give bears a chance to take control

The total crypto market cap hit a three-month high of $2.23 trillion on April 3, but the return between March 28 and April 4 was up 1.9%. During that time, Bitcoin (BTC) posted a negative return of 2.6%, although this was more than offset by gains from altcoins.

Total crypto market cap, billion USD. Source: TradingView

While Ether (ETH) and Binance Coin (BNB) are up less than 3% over the past seven days, a handful of mid-cap altcoins managed to gain 20% or more.

On April 1, Bitcoin network difficulty hit an all-time high of 28.587 billion. The indicator correlates to the computing power required to mine BTC blocks, currently at an estimated hash rate of 201.8 exhashes per second (EH/s).

Profit-taking and Bitcoin consolidation give bears a chance to take control
Profit-taking and Bitcoin consolidation give bears a chance to take control

However, on the same day, the US Securities and Exchange Commission officially denied the application for ARK 21Shares Bitcoin Exchange Traded Fund (ETF). The regulator argued that the Cboe BZX Exchange failed to meet the requirements to list a financial product under its rules of procedure and those of the Exchange Act.

Comparing winners and losers yields skewed results as the top 3 coins had a slightly negative impact.

Weekly winners and losers among the top 80 coins. Source: nomics

Zilliqa (ZIL) gained 56% after reporting it will launch a metaverse platform as a service in April. According to a press release, Zilliqa’s Metapolis will be built in real time using Nvidia Omniverse 3D. Nvidia is a $684 billion Nasdaq-listed graphics processing unit (GPU) manufacturer.

Aave (AAVE) is up 38% following the launch of Aave v3 announced on March 16th. The new features should offer greater capital efficiency, more security and cross-chain functionality. The non-depot liquidity protocol allows users to lend, borrow or stake their assets to earn a return on their holdings.

Synthetix (SNX) gained 28% after debt pool synthesis implementation was scheduled for April 7th. Currently, the decentralized finance protocol operates debt pools on two Ethereum chains: the mainnet and Layer 2 scaling solution Optimism. By switching to a “native optimism protocol”, the app will merge your pools to maximize liquidity.

Apecoin (APE) faced a natural correction after gaining 60% between March 21 and March 28 as the company behind it raised $450 million in a funding round led by Andreessen Horowitz. Yuga Labs, the creators of the Bored Ape Yacht Club (BAYC), launched APE as a utility and governance token that allows its holders to oversee and manage the so-called ApeCoin DAO.

Tether Premium shows slight deterioration

Tether (USDT) premium on OKX is a good indicator of crypto demand from China-based retailers. It measures the difference between peer-to-peer transactions in China and the US dollar.

Excessive buying demand tends to push the indicator above 100% fair value, and during bear markets, Tether’s market supply is flooded, resulting in a discount of 4% or more.

Tether (USDT) peer to peer against USD/CNY. Source: OKX

Tether hit 99.2% on April 2, its lowest level since January 26. While that’s a far cry from panicking retail sales, the gauge showed a slight deterioration over the past week.

The lack of retail demand isn’t particularly worrying, even though the cryptocurrency’s total market cap has surpassed $2 trillion and the gauge is down 19% since December 2021.

The futures markets show mixed sentiment

Open-ended contracts currently reflect a mixed mood. As shown below, the seven-day cumulative funding rate is slightly positive for Bitcoin, Ether, Solana, and XRP. This data suggests greater demand from longs (buyers), but it is far from overdone. For example, Solana’s positive weekly rate of 0.20% equates to 0.8% per month, which shouldn’t be a problem for most futures traders.

Cumulative perpetual futures funding rate on April 4th. Source: coin jar

On the other hand, Terra (LUNA) showed slightly higher demand from short sellers, and the lack of demand for Tether in Asia indicates a lack of confidence from traders.

Total market cap increased 26% in three weeks from $1.67 trillion to $2.1 trillion on April 4th. However, derivatives indicators are showing no sign of improvement, leading investors to be cautious. Until sentiment improves, chances of a negative price correction remain high.

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