Cryptocurrency Market Making Moves

While I have been spending some time celebrating the sea of green that we have been experiencing over the last couple of days, allow me to throw some water over the fire as we move forward in these markets. After a slow start to the year we have seen markets move up in bounds that has come with unexpected volume. The volume seen are quite healthy as they haven’t been this high since last year. To give you an example the last time we exceeded $30 billion in volume was in February of 2018. The interesting comparison is that are you can argue that it was the concerns of FUD that drove volumes in the markets which led to the start of the downtrend. This time, there are not very much catalysts out there other than the significantly suppressed market with the prices that are at near all time low in regards to a lot of the altcoins and weakness with bitcoin.

We have experienced a number of these since the bear market started in January 2018 including some increases of almost 100% for some assets. Unfortunately, none were met with follow-through in breaking the trendline that has been put in place. This move seems like all these others in that the trendline remains intact from the market capitalization perspective. These have come to be known as "dead cat bounces" which are exciting to experience but lead to more participants giving up on the market at the end of the day. However, there may be some significant differences in this bounce that maybe worth paying more attention to.

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One of the main indicators that I have looked at in the past for expected movements in the market has been bitcoin dominance. This was for me one of the early indicators last year that made me feel like there was a top in prices. Bitcoin had historic lows in dominance in the low 30%. However, as altcoins started to lose their glimmer, investors slowly supported bitcoin more than others, including Ether which at one point nearly became the largest capitalized cryptocurrency asset in the market. This trend reversed quickly as the FUD in the market accelerated and ICOs started to liquidate their funds to ensure proper funding for their projects. Today, dominance continues to be above 50% which is the metric that I have the most been following over the last couple of months to signal the return of a bull market. In my opinion, as long as this number remains above 50% we will not see a new uptrend in the market.

These are my thoughts for the overall market but I believe that there is opportunity in certain assets as they could decouple their performance from the market due to catalysts within their own ecosystems. We have seen over the last couple weeks that a number of the top 20 assets in the market have outperformed bitcoin and the general market. While the market is up over 20% since its December 2018 lows, bitcoin has only slightly outperformed being about 26% above its lows for the year. However, lows at the following assets that have outperformed significantly (gains vs. their lows):

• Waves: 220%
• Binance Coin: 160%
• Tron: 140%
• EOS: 130%
• Litecoin: 110%
• SBD: 84%
• Ether: 80%

Encouraging to see our very own SBD on that list! This demonstrates that the market is rewarding projects that seem to be adding value for being adopted in one way or another. Now they are many others on the list that I do not know much about, the trend is showing that while assets are clearly dying, a few continue to have demand as their projects continue moving forward. At the same time, bitcoin continues to solidify its stance as the asset class leader given it continues to be preferred over Stablecoins for trading pairs. While Stablecoins have made a mark given that most are now in the Top 50 in market cap, they still represent less that 3% of the overall market. This could add to FOMO if the trend continues but I think they have established themselves withba place in the cryptocurrency market in the short term as volatility plays out.

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Unfortunately, despite the increases and great performance on most assets, the top assets remain well below their all time highs. The best performing asset in this metric (excluding Stablecoins) is Binance despite still being down over 50%. This demonstrates the challenge going forward for many assets as the trend continues to be lower despite signals to the contrary. I feel that uncertainty remains in a number of aspects that will not allow a broad increase to occur; instead, select assets will continue to be preferred over other that will fail. Only time will tell but I believe we need to remain patient as the opportunity will present itself to confirm an upward trend to participate in the upside. I look forward to hearing your thoughts as there has been a lot of emotion lately in experiencing these moves.

Thanks to @coingecko for providing great tools on their website to support this and other analysis!

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