Cryptocurrency Market Update: Analysis and Insights – February 21, 2024

The Bitcoin price reached a new multi-year high yesterday two hours after the US market closed: It went up to 52,945 US dollars according to Coinmarketcap. This is a level that was last observed in December 2021.

The price of Ether also reached a new high yesterday around the same time, quoting above the 3,000 US dollars level for the first time since April 2022.

So, Bitcoin is flat this week. Ether is among the best performers among the top 10. Cardano’s ADA, BNB and TRON’s TRX are also performing well with performances up to 10%.

On the other hand, Solana and Avalanche are the worst performers this week. They are losing more than 10% at the time of writing.

The Bitcoin Spot ETF netflow continues to impress with more than 1.9 billion US dollars injected in the last 5 working days. The Grayscale Bitcoin ETF is still losing substantial amounts: more than 660 million US dollars were divested over the same 5 working days.

Despite these positive netflows on Bitcoin, its price is hitting a strong resistance above $52,500. The price got rejected every time it moved above $52,500 this week.

But there has also been a strong support below $51,300 as the price swiftly bounces back from these lower levels. The market has been evolving in a corridor for the week. A clear downside breakout could send the price back below $50,000. An upside breakout will set the Bitcoin price on a path towards $60,000.

Looking at this corridor, this week certainly looks quieter than usual on Bitcoin because US traditional exchanges were closed on Monday. So the long week-end broke the impressive pace of the bull market that started at the beginning of Feb. However, if the ETF flow is sustained, the price should break out and up before next week.

Unless miners or whales start dumping their inventory at a higher rate for some reason, there is no supply that can balance injections of 2 billion US dollars per week.

Looking at the Bitcoin supply this week:

• The miners’ reserves are down nearly 4,000 Bitcoins, against a drop of 10,000 Bitcoins that was recorded the previous week. Miners have been selling less.
• There is no indication of whales transferring their on-chain holdings onto exchanges, which would be a bearish signal: whales looking to sell their holdings. In fact, we’ve seen quite the opposite happening this week on Coinbase. As pointed out on X by bitcoin enthusiasts: 1 billion US dollars worth of Bitcoins have been withdrawn from Coinbase. This withdrawal is potentially attributed to on-chain liquidity requirements. Microstrategy’s Michael Saylor voiced its intention to hold on to its Bitcoins forever.

• As mentioned in our previous updates, Bitcoin on-chain volumes in US dollars have been going up, doubling in a span of four months. More liquidity would be needed to serve these higher volumes. And understandably, Coinbase would still be a cheap on-ramp solution to buy Bitcoins with US dollars, keep them there in segregated custody or transfer them on-chain when needed.
• Last but not least on the supply side: we have more option traders betting on a market correction before the Bitcoin ‘halving’ in April.

Supporting this trend, the graph produced by ‘the block’ shows that the put/call ratio has been going up regularly this week from 48% to 52%. SO we have more puts than calls.

For the shorter expiration dates this week, the max pain price ranges between 47,000 and 52,000 US dollars. So the max pain price is at or below current levels: this could keep or pull the market down.

We have an options open interest of 3.7 billion us dollars expiring in 2 days on Deribit with a max pain price currently at $47,000, and we also have an open interest of 1.5 billion us dollars expiring this month on the CME.

Looking at the March expiration date, there is still a very high concentration above the 65,000 level. This level is much more likely to occur in time if the ETF flow is sustained. But we can also see an accumulation of put and call positions on the downside at the 50,000 and 45,000 strike pointing at a rising probability to have a correction before the halving.

In the coming week, we could reasonably expect the market price to drop severely outside US market hours, pulled by short-term bearish traders, and then get back up to new highs during market hours.

Let’s end this session on Solana and Polygon. We mentioned that Solana is the worst performer this week. That is despite the Total Value Locked reaching 2 billion USD for the first time since June 2022. Volumes also soared on Solana and are quite sustained. Given the performance of SOL since October, the price correction looks like a well-deserved breather. Metrics are Polygon and more mitigated for the time being, but the TVL is getting close to the 1 billion USD mark, a level that was lost only in July last year. Both Solana and Polygon’s TVLs are still far from Ethereum’s (above 45 billion USD).

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