Five Positive Signals Emerging in the Crypto Assets Market

Recently, Ethereum holders have welcomed a bountiful year. With the successful completion of the Shanghai upgrade, ETH has embarked on a new round of growth, accumulating an increase of over 75% since the beginning of the year.

The current market shows an upward trend, and the bear market has collapsed. Bitcoin and Ethereum have both broken through the bear market trading range, and altcoins are also poised to rise. Despite the negative news from various aspects, such as the predictions of large-scale withdrawals and sell-offs of Ethereum and the attention of regulatory authorities on certain individuals, the Crypto Assets market has maintained an upward trend since the FTX incident hit bottom. Against the backdrop of the banking crisis and the spread of risks, the Crypto Assets market continues to perform strongly.

At this time, we can't help but rethink an old question in the Crypto Assets market: should we take action now or wait until the FOMO sentiment spreads before entering? The following five key indicators may provide you with some reference. ( Reminder: This article is for reference only and does not constitute investment advice. The Crypto Assets market is highly volatile, please assess risks with caution ).

Increase in Open Contracts

For traders, futures contracts are one of the most convenient ways to gain leveraged exposure to Crypto Assets.

The open interest ( reflects the number of futures contracts held by traders that have not been hedged or closed, including both long and short positions. Generally, a higher open interest is associated with a risk-seeking market sentiment and ample liquidity, indicating that both buyers and sellers are more active in the market.

The total open interest of Bitcoin futures has surpassed the previous high of $9.9 billion, briefly breaking the $10 billion mark during trading on Tuesday and Thursday last week. It is worth noting that the collapse of a certain trading platform has left a significant gap in the Crypto Assets derivatives market.

The rebuilding of open positions and the improvement of liquidity are signs of a better market condition. However, it should be noted that when price movements are unfavorable for traders, the accumulation of leverage may exacerbate the reflexivity of the market.

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On-chain activities are becoming more active

Although economists are still debating the pros and cons of a potential recession, the blockchain economy has shown a prosperous trend. The total number of daily active addresses on major smart contract public chains has stabilized around 2 million, a level not seen since the end of the bull market in 2022, representing a 77% increase from the low point in late August 2022.

Signs of increased user activity are also reflected in the yield market. The total yield rate of DeFi has been continuously rising since June 2022, up 94.2% from its lowest point.

The rise in DeFi yield is usually associated with the increase in Crypto Assets prices, as individuals and institutions increase on-chain trading activities or borrowing to gain leverage and implement yield-generating strategies. Higher yields also mean that borrowers can afford higher capital costs, indicating an overall better capital situation.

As the Federal Reserve combats inflation in 2022, the risk-free rates offered by U.S. Treasuries have continued to rise, increasing the competitive pressure on the relatively higher-risk Crypto Assets lending market and attracting funds away from risk assets. Since the inflation rate peaked last June and DeFi yields hit a low, inflation risks have eased, with the inflation rate falling below 5% in March of this year.

The prospect of a loose interest rate environment has revived Crypto Assets, making the entire asset class more attractive for investment, and DeFi yields more competitive.

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The Holdings of Stablecoins Decrease

Since the low point of the FTX crisis, smart money in the Crypto Assets market has been increasing its net crypto exposure, showing no signs of slowing down.

The exposure of on-chain smart money to stablecoins has dropped to its lowest level since the collapse of a certain ecosystem in early May 2022, with these high-profit participants allocating an average of 15% of their portfolios to stablecoins.

Although the amount of free capital flowing in whale wallets has indeed decreased, smart money still has a considerable amount of remaining firepower before hitting the bull market low point below 5%.

Investing in stablecoins allows Crypto Assets holders to mitigate risks and limit potential portfolio drawdowns. However, the banking crisis in March triggered a crisis of confidence in certain stablecoins and their supported decentralized stablecoins, affecting people's willingness to hold stablecoins. This is a positive signal indicating that market sentiment is shifting from dollar-pegged assets to token assets.

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Decrease in Volatility

The Crypto Assets market also has volatility indicators similar to VIX. A widely followed VIX-like derivatives platform has created a Crypto Volatility Index that tracks the implied volatility of Ethereum and Bitcoin, similar to the VIX index in traditional finance. This index not only continued to decline during the banking crisis, but the current index price is even below the lowest point of 62.80 prior to an event on a certain trading platform.

As the market thrives and open contracts increase rapidly, the reflexivity caused by leverage in Crypto Assets pricing may strengthen. However, it is reassuring that the index's expectations for future price fluctuations are weakening.

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Ethereum withdrawals are proceeding smoothly

In the months leading up to the Shapella upgrade, some skeptics spread panic, claiming there would be a withdrawal period of several weeks and questioning whether the market could absorb the billions of dollars in Ether sell-off. However, the reality turned out to be quite optimistic.

As of April 19, 25.7k validators have queued up for full withdrawals. A certain exchange that was forced to shut down its staking operations in the US accounts for 46.5% of the queue. Due to the withdrawal limits set by the Ethereum network, withdrawals will be processed within two weeks and will normalize.

For many people, a major concern is that within 5 days after the Shapella deployment, more than 1 million ETH could be quickly removed from the beacon chain as partial withdrawals. Although these withdrawals have not yet been fully completed, there are still 541,000 ETH) of which only half have been upgraded to the eligible 0x01 certificate(, so far, the market seems to have smoothly absorbed the excess supply of over 500,000.

A considerable portion of these assets has not been sold, but rather re-staked into the network. The largest staking entity of Ethereum must reinvest the rewards they have earned, as their staked tokens are a rebalancing token that helps increase the number of validators on the Beacon Chain and offset withdrawal flows.

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Market Outlook

Despite some uncertainty in the macro environment, the Crypto Assets market seems to be showing a bullish trend. Major digital coins have broken through the bear market trading range, and other smaller coins are also exhibiting a clear upward trend.

After experiencing excessive pessimism and sell-offs at the beginning of 2023, investors found themselves under-allocated, continually increasing their positions and driving up prices, putting the Crypto Assets market on the brink of a mini bull market. Since the beginning of this year, smart capital has been involved in the rise of Crypto Assets, and there is still ample capital available for allocation.

This round of increases is not only reflected in prices; Crypto Assets have also found sustainable application scenarios, maintaining high user activity and boosting DeFi yields, which has been an upward trend since the inflation peak in June 2022. The local equivalent of VIX in the Crypto Assets market has already broken through the 2022 low, with trading levels reaching new highs since the last bull market. The pessimistic expectations surrounding the Ethereum Shapella upgrade have also become a thing of the past.

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