Cryptocurrency Market Update: Analysis and Insights – February 7, 2024

Cryptocurrency markets are relatively flat this week. The Bitcoin price has been swinging within a 3% range around 43,000 US dollars. The price of Ether stayed close to 2,300 us dollars all week before breaking out recently. It’s now quoting at 2,361 us dollars, still struggling to move higher than the 2,390-resistance level that was already reached on Tuesday last week.

Volatility is going down again this week. The 30-day at-the-money implied volatility on Bitcoin is down 4 points this week, pointing still towards market consolidation.

On the derivative markets, the Bitcoin open interest on futures is still high and relatively stable this week.

Regarding Bitcoin options, the total open interest naturally lost at least the fourth of its amount in US dollars since December last year, but we still have a much higher total open interest in January 2024 compared to previous January months.

Remember we explained last week how the option market can influence the Bitcoin and Ether price dynamics. We talked about the maximum pain price’, that is for one expiration date, the price level where the final value of all market options is at its lowest. Well the maximum pain price this month is still at 43,000 US dollars for Bitcoin, and it is at 2,300 us dollars for Ether. So it turns out that markets have been gravitating around their respective maximum pain price all week.

Looking at the total volume traded on centralized exchanges reported by ‘the block’, we’ve had 1.15 trillion dollars exchanged in January. It is the best month observed since May 2022. That is an average of 37 billion dollars per day. In February so far we have a much lower average between 15 and 20 billion dollars per day.

DEX volumes are also trending down. Average daily volumes are back to November levels. DEX volumes on Layer 2s like Polygon or Arbitrum are especially low now, back to September levels at least. Levels on Solana and Avalanche are holding on better for the time being.

Overall, we could be heading back temporarily towards a low volatility and low volume regime until the halving event in 71 days.

From the institutional side, we have large net inflows for the week ending on Saturday, as recorded by Coinshares. Cash is still poured into the Bitcoin ETF alternatives to Grayscale. Funds are leaving Grayscale because investors are naturally arbitraging fees. Blackrock’s IBIT fund has assets under management above 3 billion US dollars now, and still climbing at a sustained rate.

This summary has been published by Lookonchain showing the ETF daily flows. We can see that net flows have turned positive since the end of Jan. Inflows in Blackrock and Fidelity ETFs are largely offsetting Grayscale’s outflows.

So all in all, if we resume the dynamics so far: we have now net positive inflows in Bitcoin ETFs. We actually have net positive inflows in Bitcoin-linked products in general. We have potentially some upside resistance stemming from the option markets because the 43,000 level has some significant gravitational pull.

And last but not least, miners are still selling the Bitcoins they’ve been accumulating in December. They’ve been selling nearly 25,000 Bitcoins this week according to Into The Block.

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