Glassnode, an on-chain analytics firm, has recently published a report suggesting that investors are showing a preference for risk-off assets such as stablecoins and Bitcoin. The report also highlights that altcoins are currently at a crucial turning point, with a potential breakout imminent.
Analysis of Uniswap and Futures Trading Volumes
According to the report, the uptrend that began in the first quarter of 2023 began cooling off in April due to regulatory concerns and a lack of liquidity, leading to risk-off tendencies among traders. Glassnode’s analysis of Uniswap and futures trading volumes revealed that while it may appear that memecoins caused a surge in Uniswap’s trading volume, a closer look at Uniswap’s pools reveals that the majority of volume was for top cryptocurrencies in Wrapped BTC, Ether (ETH), and stablecoins. The report also highlighted that sandwich attacks and bot trading accounted for a significant amount of trading activity.
The report revealed that 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. Glassnode analysts suggested that this decline in futures trading volumes is a sign that “institutional trading interest and liquidity remains quite weak.” Similarly, the market share for Bitcoin (BTC) perpetuals versus their Ether counterparts shows a huge discrepancy, with 65.5% dominance for Bitcoin, a significant shift from 2022 when the two assets had equal shares in the perpetual swap space.
Trends in the Crypto Market
Tether (USDT) has absorbed a significant proportion of outflows from Binance USD (BUSD) and Circle’s USD Coin (USDC), pushing USDT to a new all-time high supply of $83.1 billion. Historically, capital flows from majors like Bitcoin and Ether into altcoins. However, the above trends show that lately, the capital rotation is happening away from high-risk altcoins towards low-risk assets like stablecoins and Bitcoin.
On the technical side, Bitcoin’s dominance percentage over the crypto market experienced an uptrend in 2023 before encountering resistance at the 48.35% level. If Bitcoin 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.
Glassnode’s report suggests that investors are currently rotating their capital towards stablecoins and Bitcoin, while altcoins are at a crucial turning point. The report highlights that regulatory concerns and a lack of liquidity are the primary reasons for this shift. Bitcoin’s dominance percentage over the crypto market is experiencing an uptrend, but if buyers are unable to break out above the current resistance, an altcoin rally relative to Bitcoin could be expected. The TOTAL2 chart has experienced a reversal in its positive breakout, pushing the index back into a bearish triangle pattern. 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.