In January, the overall crypto market fell -22.1% (total market cap) as some profits were taken after a strong 2021. The pace of technology and investment adoptions into the blockchain space is growing. The rising relative market dominance of some of these promising protocols (ie. SOL, DOT, AVAX, ADA) outside of Ethereum is worth highlighting as the overall industry matures.
We are already seeing a reversal in the market as the losses from last month have largely been recouped. Despite the market volatility, we remain optimistic for crypto in 2022. And we stand firm in SBLI's rebalancing strategy to outperform in the longer term.
Total marketcap trend
The total marketcap continued its dump in January, dropping from 2.5T all the way to as low as 1.5T, before recovering back to 1.9T by the end of Month. From looking at the weekly charts, we may have escaped a full blown bear market as we managed to bounce out of the W1 ichimoku clouds shown below.
Looking at moving averages, we've rebounded back into a key structural area but sitting right below the W1 50EMA/SMA (green lines). We are technically showing a bullish divergence against the trough in July 2021 against the RISI and MACD is slowly improving; however in the short term we will need to reclaim above the W1 50EMA before we can call a clear reversal in trend.
The Corn managed to climb itself out of a long term diagonal downtrend, and is pushing through D1 50MA at around 42.7k. We're approaching the edge of the kumo cloud which will act as some short term resistance. The break from 37.5k to 41.5k also created a crossover between the cloud signal and base line (bullish) - however seeing some short liquidations on this move up + we're hitting some kumo cloud resistance expect some consolidation before the next move. We are still fundamentally bullish here as we believe after a consolidation we should be trading back above 46k in the ensuing weeks/months.
Not much to update on the dominance side as it is still consistent with last month's commentary - the bullish divergence on dominance seems to be playing out. If we see a BTC breakout from here (see above), we could see dominance head back to W1 50EMA level (45%, around green line).
BTC & ETH exchange net flows
We're finally seeing a net outflow on both BTC and ETH this month from exchanges; however keep track of exchange inflow/outflows for the past few months we notice there wasn't an immediate relationship to the direction of the market and this could easily be due to MM/whale manipulation on markets.
January 2022 outflows
December 2021 outflows
However, we found that there has been some accumulation from whales since early January. This seems to be in line with the recent BTC and ETH acquisition by KPMG (one of the big 4 auditing firms globally). We believe like when Tesla announced its BTC purchase, this is another step towards crypto institutionalisation.
Spot vs Derivatives
Since the dip in late January, the CVD on spot and derivatives is on a one way uptrend, signalling strong buyers from both spot and perpetuals (be it speculative or not). Funding have been fluctuating but we're seeing open interest levelling and funding slightly levelling off - a sign of derivative positions closing which usually is a healthy signal for spot market. We don't have a strong read on the current market off the data below however judging by the rising CVD and open interest coming lower this should be a slightly bullish sign for BTC (and crypto in general) to go higher.
Vol smiles have slightly became less skewed towards the downside in the shorter dated tenors whilst on the longer dated tenors the skew became less positively skewed.
We finally saw realised vol broke above implied vols, with 30day realised broke above implieds by at least 10%. In most cases market prices implied vols higher than realised; this could a good opportunity to be longing vol here if you believe implied vols are being mispriced here.
Open interest still concentrated in the quarterly expiry (25March) with more calls than puts open interest. Max pain for the quarterly end contract is sitting at 42k, whilst the 25 Feb 2022 contract shows a max pain price of 40k at the moment.
Fear and Greed
Fear and greed have moved back into neutral levels since we had one of the lowest readings in January (registered 10 in January 9th, 11 in January 23). From the lowest point in January 23rd, BTC has risen 35% from the bottom. Perhaps it's always worth a bet to long BTC whenever Fear and Greed is near single digits?