The Weekly Recap: Week 48 & 49

KEY TAKEWAYS

  • BTC reached a new historic high on December 1, breaking previous records. The following week has been relatively quiet, as market overconfidence dampens
  • The Ethereum network has garnered enough Ether staking to kickstart the ETH 2.0 upgrade

Bitcoin 

It has been a tumultuous couple of weeks for Bitcoin. The price faced a steep correction shortly after hitting $19.6k on November 25 – just shy of its historic high in 2017. Within 24 hours, BTC plunged by $3k, back below $16.5k, posting a 12% loss. The sudden and sharp dip liquidated billions, clearing out excess leverage from the crypto derivatives market. 

The crash was probably part of a much-anticipated correction, prompted by OKEx’s withdrawal resumption following a month-long suspension of service. 

Bitcoin eventually found support at $16.5k and recovered more than 50% of the pullback in the following days, closing the week at $18,145. This week saw the price reach an all-time high of $19,912 on December 1. The charge toward $20k eventually lost momentum but the price remained in range trading between $18.5k and $19.6k. The significant intraday volatility was reflective of market exuberance. 

BTCUSD Price: Week 48 & 49

According to analysts, closing above the previous monthly ATH was a harbinger of a strong bullish uptrend. November has seen BTC break through previous closing highs and thus the market will probably anticipate a strong bullish drive. 

BTC market dominance in the crypto market dipped again, down to 63.58%. The market dominance breakdown of other major cryptocurrencies is as follows 

 BTCETHBCHLTC XRPLINK
Market Share63.58%12.06%0.95%0.98%4.94%0.93%
Weekly  Change 0.55%-0.16%-0.03%0.03%-0.14%-0.06% 

Ethereum

After peaking at around $620 on November 23, ETH began to slump in tandem with Bitcoin. It did however, manage to establish support at the $500 mark, before slowly climbing back to $600 on December 1, recouping some losses incurred during the minor correction. The price has since been range trading between $560 and $620. 

ETHUSD Price: Week 48 & 49

ETH 2.0 reached its threshold in order to kick-start Phase 0 of the update. The contract now has more than $700 million worth of ETH (equivalent to 1,190,081 ETH), 62% more than what’s required to launch Phase 2 of the upgrade, which was completed on December 1, 12:00 UTC. This is a testament to the market’s confidence in the longevity of Ethereum’s development.  

ETH 2.0 Staking

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On-Chain Activities 

Heightened on-chain activities indicate greater usage of the network. The number of active entities on the Bitcoin network increased steadily this year. The figure is approaching 400,000 active entities, just 4% short of its previous all-time high. The number of active entities refers to the number of unique entities that have recently been either as a sender or a receiver. 

From the graph below, we can observe that the number of active entities decreased dramatically since the 2017 peak. The data shows that these entities started to become highly responsive to the price fluctuations in January 2020. 

The steep slope reflects a greater elasticity to BTC price changes, indicating increasing interest in Bitcoin as an investment alternative. 

The number of accounts holding more than 1 BTC is back to its previous level, after the massive correction on November 25. However, the number of accounts seem to have reached a plateau. 

Active Addresses With Balance ≥ 1 BTC

BTC’s consolidation phase coincided with the longest period of BTC supply depletion on exchanges. The cycle of low BTC supply on exchanges continues, and has lasted around 10 months — twice as long as the previous cycle. Around 20% of the volume taken from exchanges have been transferred to cold wallets, up 8% from the previous cycle. The volume transferred from exchanges suggests that there has been a persistent HODL pattern among crypto investors who share an unfailing optimism on the market outlook. 

The Fear and Greed Index recorded a new all-time high on the last day of November, after a small pullback on November 25 when BTC weathered major correction. With extensive mainstream media coverage on BTC’s lucrative gains, retail FOMO could push sentiments even higher.

Crypto Fear & Greed Index

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Similarly, the Ethereum network has also witnessed increased activities. ETH’s mining difficulty reached an all-time high. 

Hashrate — an indicator of computing power — surpassed previous highs. However, hashrate is a lagging indicator that often moves in tandem with ETH’s price.

Other than being buoyed by the rising ETH price, the surge in mining difficulty could also be partly propelled by Chinese industrial miners with enhanced rigs, which in turn contribute to network robustness.

The Ethereum network has experienced a significant increase in transaction fees since June, which was primarily propelled by the DeFi frenzy. However, as DeFi interests cooled in subsequent months, so did monthly transaction fees.

ETH’s holding signal continued to grow stronger in week 48 and 49. The total number of addresses with a positive balance grew by 15 million in 2020, breaking last year’s record. There are still around 16.3 million more active addresses holding BTC.

Altcoins & DeFi 

XRP experienced staggering growth after posting a 120% gain two weeks ago, though it has experienced a bit of a rollercoaster ride since. Similarly, other leading cryptocurrencies have undergone double-digit swings in both directions, proving that the market remains highly volatile. 

The total value locked in DeFi suffered a delayed plunge on November 28 but has since climbed back. It reached an all-time high on December 1, with total values exceeding $14.7 billion. 

Derivatives 

The open interest on CME surpassed Binance to emerge as the new leader in the bitcoin futures market. CME offers a centralized, regulated derivatives trading platform for those who are slightly weary about the risks involved in regulated exchanges.  The rise of CME marked an important milestone for institutional bitcoin trading. 

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CME also saw record-high daily volume last week, with $2.2 billion changing hands on Friday. 

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News Headlines 

U.S. President-Elect, Joe Biden is tapping former Federal Reserve Chairperson Janet Yellen to head the U.S. Treasury. Yellen is expected to champion extraordinary fiscal support by advocating a much larger stimulus package. An expanded balance sheet in the prolonged near-zero interest rate will turn aggressive investors to look for assets with better returns — Bitcoin and other cryptocurrencies seem to be a likely move.

More importantly, S&P Dow Jones Indices announced that it will launch a customizable cryptocurrency indexing service in 2021. One of the most prestigious indices is poised to become a hub for crypto price data and could be the harbinger of more crypto-related financial products and broader mass adoption. 

What to Expect?

November has been one of the most bullish months of this year. Bitcoin touched a new high after almost three years. As trading volumes exploded in Week 48, market sentiment reached its highest level. The week that followed has been relatively quiet, exiting the overleveraged environment and entering a much healthier state.

Greater risks, including either a plunge in demand of safe-haven assets, could nudge the price out of its current trading range. Profit-taking activities at a high price could also push prices into a downward spiral if they hit a critical range.