Corrections in Bitcoin and Ethereum were shallower than in the previous uptrend, allowing for the existence of a certain level of investor support and capital inflows. Glassnode arrived at these conclusions.
The digital asset market continues to post impressive performance, with $BTC and $ETH appreciating meaningfully against USD and gold.#Bitcoin dominance also continues to rise, outpacing traditional and digital assets.
Read more in our latest analysis?https://t.co/e2Js9FinHY pic.twitter.com/yIRh1WRtFA
— glassnode (@glassnode) November 1, 2023
Global uncertainty could have attracted many investors from TradFi — since the start of the year the major cryptocurrencies have proven more effective stores of value than the key precious metal. Bitcoin, relative to gold, rose 93%, Ethereum 23%.
Analysts noted that the relative strength of digital assets can be observed by evaluating the depth of corrections using Ethereum as an example. In their view, the price of the second-largest cryptocurrency established a cyclical low in June 2022 after the collapse of 3AC, Celsius and Terra.
Since then, the deepest ETH/USD correction amounted to -44% amid the collapse of FTX. Currently Ethereum trades 26% below its 2023 high, which is significantly higher than the -60% or larger drawdowns observed in previous cycles.
The metric for Bitcoin in 2023 was a mere -20.1%. In the 2016–17 bull market, corrections regularly exceeded -25%, while in 2019 the pullback topped 62%, the experts noted.
Analysts proposed using the BTC/ETH ratio as an indicator of transitions between high-risk appetite and capital preservation regimes.
The chart below shows the metric’s decline. A similar situation was observed in May–July 2022, when the ratio reached the current level of 0.052.
Analysts compared MVRV for Ethereum with its 180D—MA. They show that the market is currently in a state of uncertainty, as the first indicator has not yet surpassed the second.
If this happens, experts could note a transition to the initial phase of recovery — investors’ profitability becomes increasingly meaningful and often signals a rising market. In their view, the Ethereum market has not yet recovered from the ‘hangover’ of 2022.
Analysts examined the previously proposed altcoin-season indicator but supplemented it with a new filter. According to it, the risk-on regime occurs when the total altcoin market capitalization (the total market value of cryptocurrencies excluding Bitcoin, Ethereum and stablecoins) grows.
The analysis recorded that all criteria were met as of October 20 — shortly before the rally in the price of digital gold to $35,000.
During this period, the daily growth in the market capitalization of cryptocurrencies excluding Bitcoin, Ethereum and stablecoins reached 21.3%. There have been only six days in history when the figure was even higher.
“This underscores the ‘waterfall’ effect of investor capital, as rising Bitcoin dominance typically leads to a sharp rise in the value of altcoins relative to fiat currencies,” — the experts explained.
Analysts recalled the rise in Bitcoin dominance from a late-2022 low of 38% to 53%. The trend can be expressed through the growth of the market capitalization of digital gold and altcoins — the first metric rose by 110%, the second by 37%.
“Crypto assets excluding stablecoins and Bitcoin outperform fiat currencies and TradFi instruments like gold. At the same time, digital gold leads by a wide margin,” the experts concluded.
Earlier, analysts noted interest from asset managers in Ethereum.
Earlier, Jeffrey Kendrick, head of research at Standard Chartered, forecasted a price rise of the second-largest cryptocurrency to $8,000 by the end of 2026.