On-chain analytics firm Glassnode published a report suggesting that investors are shifting capital to high-risk assets like stablecoins and Bitcoin. Technical data shows that altcoins are at a crucial turning point between a positive and a negative breakout.
Glassnode’s analysis of Uniswap and futures trading volumes shows that the uptrend that began in the first quarter of 2023 began to cool in April, with regulatory concerns and a lack of liquidity fueling risk aversion among traders.
The report stated that while it seems like memecoins drove a surge in Uniswap’s trading volume, a closer look at Uniswap’s pools reveals that most of the volume was for top cryptocurrencies in Wrapped BTC, Ether (ETH), and stablecoins.
In addition, sandwich attacks and bot trading accounted for a significant portion of this trading activity. The report read:
“If we take into account that many bots engage in arbitrage or sandwich attacks, the measure of ‘organic’ trading volume on Uniswap could account for more than two-thirds of all DEX activity.”
Futures trading volumes for Ether on centralized exchanges declined in May, with average 30-day trading volumes falling to $12 billion per day from an annual average of $21.5 billion.
Glassnode analysts suggested that the decline in futures trading volumes is a sign that “institutional trading interests and liquidity remain quite weak.”
Similarly, the market share for Bitcoin (BTC) perpetuals versus their Ether counterparts shows a huge discrepancy, with Bitcoin dominating at 65.5%. In 2022, the two assets had an equal share of the perpetual swap space. However, the trend has shifted significantly over the past year.
Tether (USDT) has absorbed a significant portion of Binance USD (BUSD) and Circle’s USD Coin (USDC) outflows, pushing USDT to a new all-time high of $83.1 billion.
In the crypto market, capital usually flows from the majors, such as Bitcoin and Ether, to altcoins. However, the above trends show that recently capital rotation is taking place from high-risk altcoins to low-risk assets such as stablecoins and Bitcoin.
Bitcoin’s Relative Strength vs. Altcoin’s Price Momentum
Technically, Bitcoin’s percentage of dominance over the crypto market, which measures the share of Bitcoin’s market cap in total crypto valuation, experienced an upward trend in 2023 before encountering resistance at the 48.35% level.
If Bitcoin buyers cannot break above this resistance, the market can expect an altcoin rally against Bitcoin.
On the other hand, the TOTAL2 chart, which measures the market capitalization of the cryptocurrency market excluding Bitcoin, had reversed its positive triangle pattern breakout, causing the index to revert to a bearish triangle pattern that started to form in October 2022.
Related: Ethereum Gas Costs Cooling After May Memecoin Madness
Currently, the overall altcoin market cap is tied to a bearish descending triangle pattern with lower highs and a parallel support level of $433.39 billion. Below this level, sales would likely accelerate.
If buyers move higher building support above the $616.35 billion parallel resistance from weekly close, altcoins could continue to climb higher in the coming weeks.
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