Crypto Assets market shows 5 positive signals

Recently, ETH holders have welcomed a year of substantial returns. After the successful Shanghai upgrade, the price of ETH began to rise, accumulating an increase of over 75% this year.

The market is in an upward trend, and the bear market has ended. Bitcoin and Ethereum have broken through the bear market trading range, and altcoins are also stirring, preparing to start fluctuating.

Despite the pessimistic voices still present in the market, with some predicting a large-scale sell-off of Ethereum and regulators paying attention to industry trends, the Crypto Assets market has been on an upward trend since the FTX incident hit bottom. During the banking crisis and risk transmission, Crypto Assets performed remarkably well, rising significantly.

Now, investors are faced with a classic question: should they enter the market now or wait until the FOMO sentiment arises to buy in? The following five key indicators may provide you with some reference. (Note: This article does not constitute investment advice, the risk in the crypto market is high, please make cautious decisions.)

1. The number of open contracts surged

Futures contracts are a common way for traders to gain leveraged exposure to Crypto Assets. Open interest (unsettled contracts) reflects the number of futures contracts held by traders that have not been hedged or settled, including long and short positions. Generally, high open interest is associated with risk appetite and high liquidity.

The total open interest in Bitcoin futures has exceeded the $9.9 billion peak before the FTX collapse, even breaking $10 billion last Tuesday and Thursday. This indicates that market conditions are improving, but it is also important to note that the accumulation of leverage may lead to increased price volatility.

2. On-chain activities are becoming active

Despite economists' disagreements about a potential recession, the blockchain economy is thriving. The daily active addresses on major smart contract platforms have stabilized around 2 million, marking the first time this level has been reached since the end of the bull market in 2022, which represents a 77% increase from the lows seen in late August 2022.

The overall yield of DeFi has continued to rise since June 2022, increasing by 94.2% from its lowest point. Higher DeFi yields are typically associated with rising asset prices, reflecting an increase in on-chain trading activity and leverage operations by individuals and institutions.

As inflationary pressures ease and expectations for loose monetary policy rise, the Crypto Assets market is rejuvenating, and the appeal of DeFi yields has also increased.

3. Decrease in Stablecoin Holdings

Since the low point of the FTX crisis, "smart money" in the crypto market has been increasing its net crypto exposure, showing no signs of slowing down. The on-chain "smart money" exposure to stablecoins has dropped to the lowest level since the Terra-Luna collapse in May 2022, with these high-yield participants keeping an average of 15% of their portfolio in stablecoins.

Although liquidity has decreased, there is still a considerable amount of "smart money" remaining before reaching a bull market low point below 5%. The banking crisis in March affected investors' confidence in stablecoins such as USDC, prompting a shift of funds from dollar-pegged assets to other Crypto Assets.

4. Decrease in Volatility

The crypto assets market also has a volatility index similar to the VIX. The crypto volatility index developed by CVI Finance tracks the implied volatility of Ethereum and Bitcoin. This index has not only continued to decline during the recent banking crisis but is currently even below the lowest point of 62.80 before the FTX incident.

Although the rapid increase in open contracts may exacerbate price volatility, the CVI index's expectation for future price fluctuations has weakened, which is a positive sign.

5. Optimistic Ethereum Withdrawal Situation

Before the Shapella upgrade, the market was concerned about large-scale withdrawals and sell-offs. However, the actual situation is relatively optimistic. As of April 19, only 25.7 thousand validators are queued for full withdrawals, of which 46.5% come from a certain trading platform that was forced to shut down its US staking operations. Due to the withdrawal limits set by the network, these withdrawals will be processed gradually over the next two weeks.

Although there may be over 1 million ETH partial withdrawals within 5 days after the Shapella deployment, the market seems to have smoothly absorbed over 500,000 in supply. Many of the withdrawn ETH have not been sold, but rather re-staked into the network.

Market Outlook

Despite the ongoing uncertainty in the macro environment, the Crypto Assets market is showing a positive trend. Major digital coins have broken through the bear market trading range, and smaller coins are also showing a significant upward trend.

After experiencing pessimistic sentiment at the beginning of 2023, investors found themselves under-allocated, continuously increasing their positions and driving up prices, putting the Crypto Assets market on the edge of a small bull market. Smart capital has been involved in this wave of increases since the beginning of the year, and there is still ample funding available for allocation.

This increase is not only reflected in the price; crypto assets have also found sustainable application scenarios, maintained high user activity, and boosted DeFi yields. The volatility indicator of the crypto market has surpassed the low point of 2022, with trading levels reaching a new high since the last bull market. The pessimistic expectations following the Ethereum Shapella upgrade have also proven to be unnecessary.