Crypto prices are falling somewhat as trading volumes continue to decline

by Arthur · October 30, 2022

Table of Contents

Price action

BTC and ETH gave back some of their Monday gains as volume and volatility continued to ease in cryptocurrency markets.

CoinDesk Market Index (CMI)a broad-based market index that measures the performance of a basket of cryptocurrencies was relatively flat, falling 1.64%.

Bitcoin (BTC) in line with CMI; the price fell 1.77%. Trading activity moderated again and overall volume followed bitcoin’s 20-day moving average. The decline marked the fifth consecutive day and the ninth of the past 10 with lower-than-average volume. The exception occurred on 13 October, when trading increased with the latest release of the consumer price index.
Ethers (ETH) performance trailed CMI, price fell 2.5%. ETH’s trading volume was also below average, falling below its 20-day average in eight of the last 10 days. Ether sold off sharply during 1:00 PM and 2:00 PM UTC (9:00 AM and 10:00 AM ET), when traditional US markets opened. The second largest cryptocurrency by market capitalization fell below the psychologically important $1,300 mark.
The top altcoin winners recently ANKR and XYO Networks’ XYO, which rose 16% and 15% respectively. The worst performing altcoins on the day were JasmyCoin’s JASMY and Vulcan Forged’s PYR token.

Macro view

Traditional financial markets rose on Tuesday, with the Dow Jones Industrial Average (DJIA), tech-heavy Nasdaq and the S&P 500 gaining 1.08%, 0.78% and 1.05%, respectively.

Width measurement, which measures the number of stocks moving higher versus falling, was positive; 67% of stocks across the New York Stock Exchange, Nasdaq and NYSE rose.

Macroeconomic data was little on Tuesday, even though a report showed year-over-year industrial production rose 5.3% in September. Growth in output exceeded estimates for 3.9% growth, and was the largest increase since April.

In goods, West Texas Intermediate crude and European Brent crude fell 3.7% and 1.5%, respectively. Safe haven gold fell 0.47 percent. Copper futures, often seen as an indicator of economic health, fell 1.7%. So far this year, copper prices have fallen approx. 25%.

Latest prices

● CoinDesk Market Index (CMI): 937.11 -1.6%

● Bitcoin (BTC): $19,206 -1.6%

● Ether (ETH): $1299 -2.0%

● S&P 500 daily close: 3,721.72 +1.2%

● Gold: $1,657 per troy ounce -0.0%

● Ten-year Treasury yield daily close: 4.00% −0.02

Bitcoin, Ether and Gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the spot price for COMEX. Information on CoinDesk indices can be found at coindesk.com/indices.

Technical ceiling

Crypto volatility decreases while estimated leverage increases

Crypto markets continue to operate in an environment of sideways trading, low volume and decreasing volatility.

An investor who bought bitcoin in mid-June will have seen little if any gain over the past four months.

Since then, BTC hit a short-term high of $24,000 in August, but the price has fallen about 20% since then.

ETH has also entered a season of flat trading, but investors who added their ETH on June 18 will be up close to 31%. The lead-up to the September 15th Ethereum Merge upgrade from proof-of-work to proof-of-stake probably explains the extra alpha.

The ETH/BTC ratio rose 61% between June 18 and September 8, illustrating the degree of excess returns. Since that peak, the ETH/BTC ratio has declined by 20%.

BTC’s Average True Range (ATR), a measure of price movement and a proxy for volatility, has fallen 67% over the past four months and 72% so far this year. ETH’s ATR has fallen 60% since June 18 and 72% so far this year.

For both BTC and ETH, the VPVR (Volume Profile Visible Range) tool implies that both assets are trading near levels of significant activity. VPVR illustrates trading volume by price level, and identifies prices where high levels of trading activity occur, labeled “high volume nodes.”

With both BTC and ETH trading near areas of significant price agreement, they are likely to continue trading flat, absent a catalyst that will change sentiment.

While prices have been flat, loan-to-value growth has not, as the futures estimated leverage ratio (ELR) for both has been on the rise.

Over the past month, the ELR for BTC has increased from 0.30 to 0.38, while for ETH, the ELR has risen from 0.21 to 0.24.

Increases in an asset’s loan-to-value ratio increase the risk of liquidation if prices go in the opposite direction to the investor’s expectations.

Insights into sentiment can be gained by looking at options open interest by strike price, which shows increases in options to buy BTC at both the $19,500 and $19,750 strike prices.

Positive BTC funding rates in eight of the last 10 days also suggest that sentiment is bullish.

Investors long BTC should be aware in the coming days because increased leverage combined with bullish plays could lead to forced liquidations, and falling falls if prices turn negative.

Bitcoin futures estimated leverage ratio (Glassnode)

Altcoin Roundup

What’s in a Name? Lending application Apricot Finance’s token rises due to similarity with Aptos Token’s ticker: Apricot Finance’s APT tokens – which rose around 70% in the last 24 hours – share the same ticker as Aptos’ native APT tokens. Trading volume of Aprikos Finance’s tokens jumped from under $70,000 on Monday to over $2.2 million. Read more here.

CoinDesk Market Index

Biggest winners

Biggest losers

Sector classifications are provided via Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk Market Index (CMI) is a broad-based index designed to measure market capitalization-weighted performance of the digital asset market subject to minimum trading and stock exchange eligibility requirements.