The crypto market has to define itself

[view original post]

We are going to start our weekly commentary by focusing on the two main assets of the crypto ecosystem, bitcoin and ethereum. We have seen during these last days how there was a clear divergence between two main assets, something that can be seen if we examine the dominance charts

It seems that Ethereum is strongly committed to flippening vs bitcoin, although it is still a long way off if it is true that the evolution that the market is showing in 2021 is marking a clear trend of alternation in dominance. Without going into absolute values we can appreciate this different context in the dynamism of these assets

Bitcoin, obvious weakness

From a technical point of view, the forecast is very clear looking at the graph. Bitcoin is under clear downward stress that keeps it in lows at the $ 47,000 level. We also see the price significantly below the VPOC (Volume Point of Control) marking an important resistance zone. Additionally, the weighted positions in the options market are lower than VPOC price, but they maintain the price significantly above the current price for 12/31

Despite this clearly bearish situation, the balances of large operators (whales) continue to show a recurrent extraction of assets to private wallets indicating a strong accumulation

Ethereum shows higher upside potential

The Ethereum scenario confirms what we have been able to deduce in the dominance graph. We have another market sentiment, with a very remarkable fact

The average price in the options market for Ethereum as of 12/31 is higher than its all-time high

From that point of view, it seems that a new all-time high is being discounted in Ethereum at the end of 2021, unlike what we have seen in bitcoin. Whenever we talk about Ethereum, we must take into account the differential factor compared to other crypto assets such as bitcoin. Ethereum is a whole crypto ecosystem in itself, therefore it has an exponential growth potential with respect to assets that are clearly cryptocurrencies structure such as bitcoin

The fact of being an ecosystem that acts as a support for the development of new projects generates a possibility of exponential growth

The capitalization vs TVL paradox

This previous forecast is merely theoretical, but in the last hours what we can see is that there is short term downward pressure in the market. One sample is our DeFi ecosystem chart, in which we see a clear downward trend across all assets

This downtrend is in clear opposition to what we can see regarding TVL or Total Value Locked.

The capital locked in DeFi assets has a clearly bullish dynamics

The explanation for this phenomenon is complex. We could find it in the fact that the holders of crypto assets, are they trying to get a return on them in anticipation of possible declines in the market? Are we facing long-term holders who want to minimize their losses by investing in DeFi protocols?

These are questions that for now we have no answer, but they are the variables that we will have to consider to create our vision of the market.

Indecision and divergences with uncertain outlook

Once again we are faced with a complex scenario that is difficult to resolve. Some of the factors that we have discussed are clearly bullish, but right now the technical aspect of the charts in a short term does not indicate that we can see immediate rises in price. Despite this, the bullish sentiment remains, and above all …

We can interpret that the value that the market attributes to crypto assets, especially those linked to Ethereum, is higher than their current price