TA Tuesday: Analysis of BTC and ETH

At the time of writing, $BTC is trading at $46,153 (-2.6% in 7 days), below its 200-day simple moving average (SMA), which is currently $48,012.

The second largest cryptocurrency by market cap, $ETH, is trading at $3,732 (-1.26% in 7 days), above its 200-day SMA, which is currently $3,393.82.

ETH/BTC: the spread between the two currencies is trading at 0.08095 (+1.34% in 7 days), above its 200-day SMA, which is currently 0.07012.

The year 2021 has ushered in 2022, and bullish sentiment continues to be low despite bitcoin’s 13th birthday.

Bitcoin is behaving more and more like a traditional finance risk asset, and in a sense this is due to its success.

In a ranking that includes public companies, precious metals, cryptocurrencies, and ETFs, bitcoin is in 10th place ($837.5 billion) just below Meta (Facebook), and Ethereum ranks 19th ($444.37 billion).

The success of bitcoin and ether has attracted institutional investors, who want more and more exposure to digital assets, thus increasing the supply of financial instruments available.

The realised volatility is decreasing year-over-year, and so is the exponential increase in value.

The one-year at-the-money implied volatility on BTC went from 97.02% on January 4, 2021 to 67% on January 4, 2022.

Similarly, the implied volatility of ETH went from 131% to 76%.

The futures market shows the same trends: BTC Futures Annualised Rolling three-month basis on CME went from 17.99% to 4.91% in one year, while the ETH basis went from 6.64% to 5.47%.

In the coming weeks, we will see if the portfolio rebalancing had an impact on keeping the asset class down for most of December, and if this same issue could help its recovery in early 2022.

Whichever the case may be, I believe that the most interesting price increase in 2022 will see the smaller coins – driven by retail, so-called “Ethereum Killers”, NFTs, exchange tokens, and DeFi – drive the cypto adoption, and increasingly centralise the crypto ecosystem. They will be the game changers.

Do you want to unleash the full potential of digital assets?