Crypto market greed sentiment as BTC price rose.
In a recent blog post, ETC Group Head of Research Andre Dragosh provided a comprehensive analysis of the current state of the cryptocurrency market.
Dragosh’s findings shed light on the dynamics of market performance, profit-taking activity, and derivatives trends.
High Risk Appetite in the Crypto Market
The risk appetite statement is the level of tolerance that an organization declares it has for the risks related to financial crime. It allows you to establish clear guidelines on what a company considers acceptable and unacceptable risks.
In regards to cryptocurrencies, the risk statement would take into account the specific acceptable and unacceptable risks that an organization is willing to take in relation to participation in cryptocurrencies.
According to Dragosh analysis, crypto assets demonstrated their resilience by outperforming traditional assets such as stocks, supported by a significant repricing of monetary policy expectations and short-term futures sell-offs early last week.
However, this outperformance encountered some short-term limitations due to better-than-expected US employment data, which began to dampen the recent rally. US nonfarm payrolls growth and unemployment rate exceeded consensus estimates, leading to a reversal in US Treasury yields and a decline in overall risk appetite in traditional financial markets.
Notably, altcoin outperformance gained momentum during the period, with Avalanche (AVAX) and Cardano (ADA) gaining more than 50% each. Among the top 10 cryptoassets, Avalanche, Cardano, and Polkadot (DOT) stood out as the best relative performers. According to Dragosh, this increase in the outperformance of altcoins compared to Bitcoin (BTC) indicates a “high risk appetite” within the cryptocurrency market.
On the other hand, Bitcoin’s on-chain data suggests that investors are increasingly making profits, as evidenced by the growing number of profitable coins being sent to exchanges.
ETC Group’s internal crypto asset sentiment index remained relatively elevated compared to the previous week, indicating positive market sentiment. However, significant downward reversals were seen in the crypto dispersion index and BTC delta 25 1-month options bias.
The Crypto Fear & Greed Index continued to reside in “greed” territory, reflecting the current market optimism. Although ETC Group’s Cross-Asset Risk Appetite (CARA) measure declined slightly, it remained in positive territory, indicating a decline in risk appetite in traditional financial markets.
Performance dispersion among digital assets decreased compared to the previous week, but remained relatively high. This implies that correlations between cryptoassets have decreased and investments are driven by coin-specific factors, highlighting the importance of diversification among digital assets.
Short-Term Holders Collect
The market remains in a strong profit environment, with a significant percentage of BTC and ETH addresses making profits. According to Dragosh, profit-taking activity, especially among short-term holders, has increased as Bitcoin approaches recent highs, leading to increased selling pressure.
Long-term holders have also increased their profitable coin transfers to exchanges, which could hinder short-term price increases. However, it is worth noting that there is no evidence of older coins being spent, which would indicate a larger price correction.
On the other hand, aggregate open interest in BTC and perpetual futures remained stable, with notable futures short liquidations recorded. BTC options open interest saw a significant increase, accompanied by relative buying of puts and an increase in the ratio of call and put open interest.
The 25 delta BTC options biases also increased, indicating higher demand for puts compared to calls. However, overall, at-the-money (ATM) implied volatilities did not change significantly. BTC has lost its $42,000 support line, trading at $41,600, down 5% in the last 24 hours.
By Audy Castaneda
