On-chain analytics firm Glassnode recently released a report suggesting that investors are shifting their capital towards low-risk assets such as Bitcoin and stablecoins. The technical analysis shows that altcoins are at a critical turning point, with a possibility for either a positive or negative breakout.
Glassnode analyzed trading volumes on Uniswap and futures, indicating that the uptrend that began in Q1 2023 has cooled off since April due to regulatory concerns and low liquidity. According to the report, although many investors assume that memecoins triggered the increase in Uniswap’s trading volume, the majority of the volume belonged to top cryptocurrencies such as Ether, Wrapped BTC and stablecoins. Moreover, a significant portion of these trading activities were either sandwich attacks or bot trading.
In May, futures trading volumes for Ether on centralized exchanges dropped to $12 billion per day compared to the yearly average of $21.5 billion. Glassnode analysts suggested that the drop in futures trading volumes implies that institutional trading interest and liquidity are still weak.
Additionally, Bitcoin’s market share for perpetuals vs. Ether shows a considerable difference. In 2022, the two assets had equal shares in the perpetual swap space; however, the trend has shifted significantly in the last year, with Bitcoin having 65.5% dominance.
This shift implies that capital is now flowing from high-risk altcoins to low-risk assets like stablecoins and Bitcoin.
Bitcoin’s Relative Strength versus Altcoin Price Momentum
According to technical analysis, Bitcoin’s dominance percentage over the crypto market, which measures the share of Bitcoin’s market capitalization in the total crypto valuation, experienced an uptrend before encountering resistance at the 48.35% level. If Bitcoin buyers are unable to break out above this resistance, an altcoin rally relative to Bitcoin can be expected.
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, which started forming in October 2022.
Presently, 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. If the selling continues below this level, it is expected to accelerate.
However, if buyers build support above the parallel resistance at $616.35 billion by weekly closing, altcoins’ value could rise over the next few weeks.
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