Five Favourable Information Signals in the Crypto Market

Recently, Ethereum holders have welcomed a bountiful year. After the successful Shanghai upgrade, the price of ETH started to rise, having increased by more than 75% this year.

The market is rising, and the bear market seems to be over. Both Bitcoin and Ethereum have broken through the bear market trading range, and other cryptocurrencies are also showing signs of movement. Although there are still various concerns in the market, the crypto market has been on an upward trend since hitting bottom after the FTX incident. During the banking crisis and risk transmission, the crypto market has performed exceptionally well.

Now, we are once again faced with a classic question in the crypto market: should we enter now, or wait until FOMO sentiment arises to take action? The following five key indicators may provide you with some reference. ( Note: This article does not constitute investment advice, the risks in the crypto market are significant, please make cautious decisions )

Increase in Open Contracts

For traders, futures contracts are one of the most common ways to gain leveraged exposure to encryption assets.

The open interest ( reflects the number of futures contracts that have not been settled or hedged, including long and short positions. Generally, higher open interest indicates a stronger market risk appetite, better liquidity, and more active buying and selling.

The total open interest in Bitcoin futures has exceeded the high point of $9.9 billion before the collapse of FTX, briefly surpassing $10 billion last Tuesday and Thursday. It is worth noting that FTX was a major player in the crypto derivatives market, and its collapse had a certain impact on the market.

The rebuilding of open positions and improvement in liquidity are positive signals for market conditions. However, it is important to note that the accumulation of leverage may exacerbate market volatility when price trends are unfavorable.

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On-chain activities increase

Despite economists' disagreements regarding the potential recession, the blockchain economy has remained prosperous. The total number of daily active addresses on major smart contract public chains has stabilized around 2 million, a new high since the end of the bull market in 2022, representing a 77% increase from the low point at the end of August 2022.

The yield in the DeFi sector has also shown an upward trend, with a cumulative increase of 94.2% since June 2022. Higher DeFi yields are usually associated with rising crypto asset prices, as individuals and institutions increase on-chain trading activity or obtain leverage through lending and implement yield strategies. Higher yields also mean that borrowers can bear higher capital costs, reflecting an overall improvement in capital conditions.

As the Federal Reserve raised interest rates in 2022 to combat inflation, U.S. Treasury yields increased, creating competition for crypto lending. However, since the peak of inflation last June, inflation risks have eased, and the inflation rate dropped below 5% in March.

The outlook for loose monetary policy injects vitality into encryption, enhancing the investment value of the entire asset class and making DeFi yields more attractive.

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Decrease in Stablecoin Holdings

Since the low point of the FTX crisis, seasoned participants in the crypto market have been increasing their net encryption exposure, with no signs of slowing down.

On-chain data shows that these participants' exposure to stablecoins has dropped to the lowest level since the Terra-Luna collapse in May 2022, with an average of only 15% of their portfolios allocated to stablecoins.

Although the liquidity in the wallets of large holders has decreased, there is still a considerable amount of remaining funds available for deployment before reaching the bear market low point below 5%.

Investing in stablecoins can help cryptocurrency holders avoid risks and limit potential losses. However, the crisis in the banking sector in March triggered a confidence crisis in USDC and its supported decentralized stablecoins, affecting people's willingness to hold stablecoins. This indicates that market sentiment is shifting from dollar-pegged assets to other crypto assets.

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Decrease in Volatility

The crypto volatility index ) developed by CVI Finance is similar to the traditional financial market's VIX fear 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 low level of 62.80 before the FTX incident.

Although the rapid increase in open contracts may exacerbate the reflexivity of crypto asset pricing, the CVI index shows a decrease in market expectations for future price volatility, which is a favourable information.

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Ethereum Withdrawals Steady

Before the Shapella upgrade, the market was generally concerned about large-scale withdrawals and sell-offs. However, the actual situation is relatively optimistic.

As of April 19, there are 25.7 thousand validators queued for full withdrawals, of which a certain trading platform required by the SEC to terminate its staking business in the U.S. accounts for 46.5%. Due to the withdrawal limits set by the Ethereum network, these withdrawals will be completed gradually over the next two weeks.

Within 5 days after the Shapella deployment, over 1 million ETH worth of partial withdrawals were removed from the beacon chain. Although the withdrawals have not been fully completed, ) still has 541,000 ETH remaining, of which only half has been upgraded to eligible vouchers (, but the market seems to have smoothly absorbed an increase in supply of over 500,000.

A considerable portion of these assets has not been sold, but rather re-staked into the network. A large staking service provider must reinvest the rewards obtained, which helps to increase the number of validators on the beacon chain and offset the outflow of withdrawals.

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Market Outlook

Despite the uncertainty in the macro environment, the crypto market seems to be showing an upward trend. Major cryptocurrencies have broken through the bear market trading range, and other small-cap tokens are also showing a clear upward momentum.

After experiencing the pessimism and sell-off at the beginning of 2023, investors found themselves under-allocated, continuously increasing their positions and driving up prices, putting the crypto market on the brink of a small bull market. Since the beginning of this year, funds have participated in the rise of cryptocurrencies, and there is still ample capital available for allocation.

This round of price increase is not only reflected in the price, but also in the fact that cryptocurrencies have found sustainable application scenarios, maintained a high level of user activity, and boosted DeFi yields. Our crypto market volatility indicators have surpassed the lows of 2022, with trading levels reaching new highs since the last bull market. The pessimistic expectations surrounding the Ethereum Shapella upgrade have become a thing of the past.

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