Five Positive Signals in the Crypto Assets Market

Recently, the price of Ethereum has performed remarkably, with an increase of over 75% this year. After the successful Shanghai upgrade, ETH has entered a new round of growth.

The overall market is showing an upward trend, and the shadow of the bear market is gradually dissipating. Bitcoin and Ethereum have broken through the bear market trading range, and other Crypto Assets are also poised for a surge. Although there are still some pessimistic views, the Crypto Assets market has been recovering since the FTX incident hit rock bottom. Against the backdrop of a banking crisis and spreading risks, the Crypto Assets market has performed remarkably well.

The following five key indicators may provide some reference for investors:

Open Interest Increase

Futures contracts are one of the main ways for traders to gain leveraged exposure to Crypto Assets. The open interest ( of contracts ) reflects the number of futures contracts held by traders that have not been hedged or closed, including long and short positions. Typically, high open interest is associated with risk appetite and high liquidity.

The total open interest in Bitcoin futures has surpassed the previous peak of $9.9 billion set by FTX, temporarily breaking through $10 billion last Tuesday and Thursday. This indicates that market conditions are improving, but caution should be exercised regarding the risks that may arise from accumulated leverage.

On-chain activities are becoming active

Despite ongoing debates about the macroeconomic outlook, the blockchain economy is showing signs of prosperity. The daily active addresses of major smart contract public chains have stabilized around 2 million, marking a new high since the end of the bull market in 2022, which is a 77% increase from the low point at the end of August last year.

The total yield of DeFi has continued to rise since June 2022, increasing by 94.2% from its lowest point. Higher DeFi yields are usually associated with rising asset prices, indicating that participants have increased on-chain activities or borrowing leverage. This also means that borrowers can bear higher capital costs, and the overall capital situation has improved.

Decline in Stablecoin Holdings

Since the low point of the FTX crisis, Crypto Assets participants have been increasing their net position exposure. The on-chain exposure to stable coins has dropped to its lowest level since the Terra-Luna collapse in May 2022, with high-yield participants keeping an average of 15% of their portfolios in stable coins.

Despite a decrease in liquidity, there remains a considerable amount of surplus funds before reaching the bull market low of 5%. The banking crisis in March affected people's confidence in stablecoins like USDC, which also drove funds away from dollar-pegged assets towards other crypto assets.

Volatility Decrease

The Crypto Volatility Index ( developed by CVI Finance is similar to the VIX index ), tracking 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 weakening expectation of future volatility is a positive sign.

Ethereum Withdrawal Smooth

Despite concerns that the Shapella upgrade would lead to large-scale withdrawals, the actual situation is relatively optimistic. As of April 19, only 25.7k validators are in line waiting for full withdrawals, with 46.5% coming from Kraken, which was forced to shut down its staking business in the U.S. Due to network limitations, withdrawals will be processed within two weeks.

The market has successfully absorbed over 500,000 additional supplies. Many assets have not been sold but have been re-staked into the network. The largest staking provider, Lido, must reinvest the rewards obtained, which helps to increase the number of validators and offset the outflow of withdrawals.

Market Outlook

Despite the unstable macro environment, the Crypto Assets market is showing positive trends. Major Crypto Assets have broken out of the bear market range, and small coins are also performing strongly. After the pessimistic sentiment at the beginning of 2023, investors are increasing their positions, driving prices up.

Smart money has been participating in the rise since the beginning of the year, and there is still ample capital available for allocation. This round of increase is not only reflected in prices; Crypto Assets have also found sustainable adoption opportunities, maintaining high user activity and boosting DeFi yields. The CVI index has surpassed the 2022 low, and trading levels have reached recent highs. Concerns about the Ethereum Shapella upgrade have also become a thing of the past.