The latest report from Glassnode, an on-chain analytics firm, reveals that investors are rotating capital towards low-risk assets like stablecoins and Bitcoin. The report suggested that regulatory concerns and lack of liquidity promoted risk-off tendencies among traders, causing a cooling off in the uptrend that began in the first quarter of 2023.
The analysis of Uniswap and futures trading volumes also showed that while it might appear that memecoins caused a surge in Uniswap’s volume, the majority of volume was for top cryptocurrencies in Wrapped BTC, Ether (ETH) and stablecoins. Additionally, reports of sandwich attacks and bot trading accounting for a significant amount of trading activity suggest that a significant proportion of trading volume on Uniswap may not be organic.
Similarly, the futures trading volumes for Ether on centralized exchanges contracted in May, with 30-day average trading volumes dropping to $12 billion per day, against a yearly average of $21.5 billion. This decline is a potential sign that “institutional trading interest and liquidity remains quite weak,” according to Glassnode analysts.
The market share for Bitcoin (BTC) perpetuals versus their Ether counterparts also shows a significant discrepancy, with 65.5% dominance for Bitcoin, suggesting that capital rotation is happening away from high-risk altcoins towards low-risk assets like stablecoins and Bitcoin.
Technically, Bitcoin’s dominance percentage over the crypto market, which measures the share of Bitcoin’s market capitalization in the total crypto market valuation, experienced an uptrend in 2023 before encountering resistance at the 48.35% level. If buyers are unable to break out above this resistance, the market can expect an altcoin rally relative to Bitcoin.
On the other hand, the TOTAL2 chart, which measures the market capitalization of the cryptocurrency market excluding Bitcoin, had its positive breakout from the triangle pattern reversed, pushing the index back into a bearish triangle pattern that started forming in October 2022. Currently, the total market capitalization of altcoins is bound by a bearish descending triangle pattern with lower highs and a parallel support level of $433.39 billion. The selling would likely accelerate below this level.
If buyers push higher by building support above the parallel resistance at $616.35 billion by weekly closing, altcoins could continue to head higher over the next few weeks.
In the crypto market, capital usually flows from majors like Bitcoin and Ether into altcoins. However, the latest trends in the market show capital rotation happening away from high-risk altcoins towards low-risk assets like stablecoins and Bitcoin. The report suggests that investors are exercising caution amid regulatory concerns and lack of liquidity, which has led to a cooling off in the uptrend that began earlier this year.
The data from Glassnode’s report is a testament to the constant fluctuations and uncertainties of the cryptocurrency market. This demonstrates the importance of conducting thorough research and analysis before making any investment or trading decisions.
