The state of crypto – April 2023 The state of crypto – April 2023 The state of crypto – April 2023

The state of crypto – April 2023

Summary:  The collapses of crypto banks last month caused an uptick in exchange inflow as prices tumbled. Yet, dormant circulation did not move much, indicating that mostly short-term holders found themselves nervous. In sum, the exchange balance of Ether continues to decline, but uncertainties could be on the horizon, as the Shanghai hard fork is scheduled for April 12th, potentially opening the floodgates to over 19mn staked Ether, some of which have been locked for over 2 years.


Immediately upon interacting with a blockchain, much data becomes publicly available on a public ledger. Analyzing this data may provide crypto traders and investors with helpful insight into the present state of the market. In “The state of crypto”, we take a look at the most important metrics to observe the market based on transaction and trading activity. Our main focus is the two largest cryptocurrencies Bitcoin and Ethereum, and we divide the metrics into short-term and long-term indicators. You find the report for the last month here.

Short-term

The crypto market was rocked to its core in March, just as two vital crypto banks in the US specifically Silvergate and Signature ceased operations, followed by Silicon Valley Bank shortly after. The bank closures were a source of excess volatility and should be of concern going forward, as it may indicate a continual regulatory crackdown on crypto, particularly in the US.

In March, market participants continued withdrawing Ether from exchanges, as the total balance of Ether stored on exchanges declined by around 0.5%, whereas the Bitcoin balance is unchanged. This may indicate an accumulation of Ether. Yet, it may primarily be a result of the collapses of Silvergate, Signature, and other centralized intermediaries, so holders withdrew Ether fearing that these collapses were not isolated incidents. Both Bitcoin and Ethereum experienced greater exchange inflow in March as the contagion spread, but without significantly increasing transfers of dormant circulation, indicating that mostly short-term holders liquidated Bitcoin and Ethereum in March, contrary to the collapse of FTX in November last year, which caused a much greater uptick in dormant circulation.

In terms of Ethereum, we are closely watching the Shanghai hard fork scheduled for April 12th. The hard fork allows stakers to unstake their Ether. This signifies that over 19mn Ether may over time be unstaked to perhaps hit the market, some of which have been inaccessible for well over 2 years, yet it is mostly held by long-term holders. We expect the market to have trouble pricing the impact of the hard fork, in that case, excess volatility is likely.

Exchange Balance in Percent. During times when crypto investors are more inclined to sell crypto, they often store their cryptocurrencies directly on an exchange to prepare to sell their holdings. On the contrary, they often move the funds to private wallets when they are less likely to liquidate them. In other words, low exchange balances on exchanges are often perceived as valuable for a potential upward trajectory. Source: Santiment
Exchange Inflow. This metric solely concerns the total deposit of Bitcoin and Ether to exchanges without considering the withdrawal of funds. By only considering deposits, we may better interpret what leads to sell pressure. Source: Santiment
Dormant Circulation. Shows how many Bitcoins and Ether were moved after not being moved for at least 365 days prior to that – accumulated on a daily basis. A high number may express eagerness from long-term holders to liquidate their portfolios. Source: Santiment
Supply Distribution for BTC. This illustrates the supply distribution in percent of Bitcoin and Ethereum based on the amount addresses hold. This may indicate which groups are buying or selling, for instance, whether whales are selling or buying. Source: Santiment
Supply Distribution for ETH. Source: Santiment

Long-term

For the first time since June 2022, Bitcoin holders are on average in profit on their positions. This is solely based on on-chain data, though. If the market maintains this position, it may make the overall sentiment of Bitcoin and the crypto market as a whole more positive compared to the extremely negative sentiment the last year.

In March, the outflow continued out of crypto ETPs, mutual funds, and OTC trusts, particularly from Bitcoin, indicating that more traditional investors continue to liquidate crypto. Interestingly, exchange-traded products being short Bitcoin saw an inflow of $64.4mn in March.

Circulating Supply (5 years). For Bitcoin and Ethereum, there are continuously issued new Bitcoins and Ether to the supply, respectively. However, it may be the case that someone is permanently unable to access their wallet, which means the supply technically is lower. By looking at Bitcoin’s and Ethereum’s supply that has moved in the past 5 years, we might better interpret the authentic supply and whether large inactive wallets suddenly turn active. Source: Santiment
Market Value to Realized Value (MVRV) Ratio (5 years). The market value to realized value ratio (MVRV) calculates the average profit or loss of all holders based on when each token last moved over the past 5 years. For example, if the MVRV ratio is 1.5, holders are on average estimated to be up by 50%. Source: Santiment
Inflow and Outflow in ETPs, mutual funds, and OTC trusts. CoinShares publishes a weekly report on inflow or outflow into crypto ETPs, mutual funds, and OTC trusts. Since these products are particularly popular among more traditional investors, an inflow or outflow may describe the sentiment among this group of crypto investors.
Source: Saxo Group
Source: Saxo Group

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992