Cryptocurrency Failure Procedures to Slow Massive Sales That Triggered the Bear Market – Kaiko

(Kitco News) There may be a lull in the massive liquidations that triggered this winter of cryptocurrencies, as many prominent players are not allowed to touch assets until bankruptcy proceedings are resolved, according to the market data provider. Kaiko cryptocurrencies.

The crypto space was in the midst of a strong relief rally last week, with Ethereum outperforming Bitcoin. At the time of writing, the rally has slowed down. Bitcoin was trading at $ 21,486, up 3.4% on the day, and Ethereum at $ 1,490, up 8.6% on the day.
“The last few months have been very difficult for the cryptocurrency markets. There have been a lot of liquidity problems and, in particular, all the bankruptcy lending companies have created a lot of problems. The most liquid cryptocurrencies have been the hardest hit. because they are typically the first to get liquidated when you need to strengthen your balance sheet, repay a loan or exit volatile markets, ”Kaiko research director Clara Medalie told Kitco News in a recent interview.
After Bitcoin plunged to $ 17,000 in mid-June, the cryptocurrency has likely found its low. And the same goes for the rest of the cryptocurrency market, Medalie said. “We may have hit rock bottom. Several indicators suggest that the markets may turn back,” she said. “Overall, the cryptocurrency markets are still very correlated. Typically, when Bitcoin goes up, other markets will rise. The cryptocurrency markets will be at their peak when we see a divergence in correlations between different cryptocurrencies. Right now, they are still very closely related. tied. ”
An important signal is the bankruptcy proceedings involving lending companies such as Celsius, Voyager and 3AC that will stop the wave of outflows.

“Since all of these companies are in bankruptcy proceedings, it will take some time before they can liquidate the assets they hold,” Medalie stressed. “This could have put on hold the liquidations that have caused the bear market in recent months. What has been liquidated in the near-term future may be all there is in the next few months. Due to the many legal proceedings against them, they are probably not allowed to touch what they have in their hands until they get approval from the legal authorities. ”
However, the risk of contagion in cryptocurrencies is still out there as more information is revealed about who lent money to whom.
“Almost every day, we still see new revelations about who has lent money to 3AC or deposited in Celsius. We are still seeing the aftermath of the collapse of these large crypto entities. But it is definitely slowing down,” Medalie added.
The next big event for cryptocurrencies will be how the market reacts to the Federal Reserve’s likely 75bp hike, the second consecutive rate hike of such magnitude.
“The key drivers of the current cryptocurrency markets have been mainly macros. It will be interesting to see what happens after the next Fed meeting. It will be a strong indicator of how the cryptocurrency markets will react to macro movements in the coming months,” Medalie noted. “Most macro correlations don’t look very good for Bitcoin right now.”
Bitcoin has a pretty strong inverse correlation with the US dollar: when the dollar goes up, Bitcoin goes down. “And with the dollar hitting a decade high in recent months against most other Fiat currencies, it’s making things difficult,” he said.
Additionally, Bitcoin has had a relatively high correlation with tech stocks. “And this, again, is not the best sign because most of the stocks have suffered a steep drop, almost bear market territory in recent months,” he added.
Bitcoin will likely remain sensitive to macro signals such as the latest inflation data or unemployment numbers until global markets stabilize or inflation falls, and the Fed essentially neutralizes their monetary activity, Medalie pointed out.
“Right now, we are still in the midst of a historic interest rate hike that the Fed will launch in the coming months,” he noted. “When you have higher interest rates, it dissuades investors from putting funds into riskier assets.”

The Paris-based digital asset data provider is also watching Ethereum Merge developments. This is what triggered a strong rally in Ethereum over the past two weeks, with the cryptocurrency up 44%.
“The news that an end date for the Ethereum merger has been set for September 19 was the first time the developers have provided a definitive date. And so what we’re seeing is the merger rally, with investors a lot. thrilled, “described Medalie.
It is the most significant update in the history of the network, especially since the Ethereum network is the largest in terms of total number of users. While Bitcoin has the highest market cap in space, as a network, it is not used by as many protocols as Ethereum.
“It will be interesting to see how Ethereum Merge increases the use of DeFi protocols, especially decentralized exchanges. It has been difficult to achieve widespread adoption due to the high transaction fees on the Ethereum blockchain and the fees are expected to be drastically reduced afterwards. the merge, “added Medalie. “This can be a strong incentive to increase both liquidity on decentralized exchanges and the overall efficiency of the market and the price discovery process.”
A useful metric that Kaiko uses when trying to predict whether the bear market for cryptocurrencies is over is trading volume.
“When trading volumes are flat or falling, it means that most people are just taking a wait-and-see approach. They don’t want to pour money into cryptocurrencies right now. But if trading volumes are high or steadily increasing, then it’s generally a good sign, ”Medalie said. “When you see spikes in trading volume, it usually means a collapse in prices.”
What investors want to see is a sustained increase in volumes over time. “This is what worried some investors in particular when they looked at exchanges like Coinbase or some other exchanges that have experienced a decline in volumes in recent months. This suggests that more institutional capital is exiting the markets,” he noted.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee this accuracy. This article is for informational purposes only. It is not a solicitation to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article disclaim any liability for loss and / or damage resulting from the use of this publication.

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