Market Wrap: Bitcoin Drifts Lower as Altcoins Outperform

Bitcoin dipped below $48,000 on Thursday as short-term overbought signals appeared on the charts. Buyers appear to be taking a breather ahead of the $50,000 resistance level, and some analysts expect the price to consolidate before the next option expiration date on Sept. 24.

Blockchain data shows large transaction volume in bitcoin, which suggests buyers could remain active at lower support levels. Bitcoin was trading at around $47,000 at press time and is up about 2% over the past week.

The rally in alternative cryptocurrencies continues to overshadow bitcoin, as seen especially in Avalanche’s AVAX token, which was up about 20% over the past 24 hours. The Avalanche Foundation announced on Thursday $230 million in funding to jumpstart liquidity in the network’s burgeoning decentralized finance (DeFi) ecosystem, which contributed to the token’s price rally.

“It’s definitely altcoin season,” said Martha Reyes-Hulme, head of research at crypto trading platform BeQuant, in an interview with CoinDesk.

“BTC dominance (BTC market cap relative to the total cryptocurrency market cap) could easily pick up again, but certainly DeFi could continue – we see it on the front line in terms of client interest,” she said.

Latest Prices

• Bitcoin (BTC), $47,493, -1.4%
• Ether (ETH), $3,572, +0.2%
• S&P 500: -0.2%
• Gold: $1,755, -2.2%
• 10-year Treasury yield closed at 1.336%

“Bitcoin’s implied volatility selling off as range bound trading continues and the market heads into quarterly expiry next week,” tweeted options data provider Skew.

In a Telegram chat, QCP Capital, a crypto trading firm, noted the possibility of higher volatility heading toward the end of the month with bitcoin’s end-of-the-month expiry next week and macro uncertainty in the fourth quarter. The firm is planning to take profits on its short volatility positions.

Macro shuffle: Inflation cools as bitcoin recovers

Analysts are also monitoring inflation, which could encourage tighter monetary policy lead to a pullback in assets deemed to be risky, including cryptocurrencies.

On Tuesday, the U.S. Bureau of Labor Statistics reported that the U.S. consumer price index (CPI) rose less than expected in August, somewhat confirming the Federal Reserve’s view that rising prices are transitory because they are being compared with a low base from last year when the pandemic started. Equities pulled back following the CPI report, although the S&P 500 is roughly flat over the past five days, similar to bitcoin.

Some investors view bitcoin as a hedge against rising inflation due to its limited supply.

“Although the CPI release triggered a round of new narratives that we’ve potentially seen the peak for inflation, another rise in commodity prices yesterday suggested we aren’t out of the woods yet,” Deutsche Bank wrote in a Wednesday newsletter.

And rising inflation is not just a U.S. problem. “An area of particular interest that has the potential to create major concerns has been a big rise in European gas prices, bringing their gains since the start of August to +63.8%, and up by an astonishing +514% relative to a year ago,” Deutsche Bank wrote.

Gold, which is also viewed as an inflation hedge, is down about 7% year to date compared with a 63% rise in bitcoin over the same period. The chart below shows a declining correlation between bitcoin and gold, while the correlation between bitcoin and the S&P 500 has risen over the past few months.

“Crypto tends to lead other asset classes; it’s a risk asset, although further out the risk curve than say emerging market equities,” Reyes-Hulme said.

Large bitcoin transaction volume

According to data tracked by analytics firm IntoTheBlock, aggregated daily volume measured in U.S. dollars from on-chain transactions, where each transaction was greater than $100,000, surged to a record $480 billion on Wednesday. In bitcoin terms, the so-called large transaction volume hit a two-year high of more than 10 million BTC.

Meanwhile, data shared by Santiment shows the supply held by millionaires list or addresses owning 10,000 to 100,000 coins has gone up 60,000 BTC in the past three days alone. Lucas Outumoru, head of research at IntoTheBlock, also confirmed a pickup in demand among large investors, saying “addresses with over 1,000 BTC are accumulating.”

With strong hands backing the recent rise above the 200-day moving average at $46,000, the path of least resistance appears to be on the higher side, reports CoinDesk’s Omkar Godbole.

Altcoin roundup

• Solana network outage may be due to flawed design, says Huobi programming head: Andrew Zhang, head of Huobi Eco Chain’s Star Lab, said that the network’s outage on Tuesday was due to “excessive node memory consumption,” which “caused a chain reaction.” Zhang mentioned that the fundamental problem couldn’t be solved by simply restarting the network, and instead, pointed to deeper flaws with the blockchain’s design. In a statement to CoinDesk, Zhang also said Solana “still needs to solve some tricky follow-up issues” that surfaced after the outage.
• Cardano approximately 20% off all-time highs despite smart-contract launch: Cardano’s ADA token ended the day below its early September highs, even though the network completed its highly anticipated smart contract launch earlier this week. According to crypto research firm 21Shares, Cardano “faces some technical issues and misunderstandings from the community on the fundamental front with its accounting model.”
• Hedera Governing Council earmarked $5 billion in HBAR tokens to boost network adoption: Hedera Hashgraph, a blockchain alternative governed by the council, says about half of the tokens will be allocated to the newly established HBAR Foundation. The other $2.5 billion will go to initiatives aimed at strengthening the development of the Hedera ecosystem, reported CoinDesk’s Omar Godbole. The HBAR token has gained 100% during the month.

Relevant news

• Polychain Capital, Three Arrows Lead $230M Investment in Avalanche Ecosystem
• Revolut Is WeWork’s First Enterprise Member to Pay for Office Space in Bitcoin
• OpenSea Exec Accused of Insider Trading Resigns
• Blockchain Social Network Minds Putting 25% of Its Balance Sheet Into Crypto

Other markets

Most digital assets in the CoinDesk 20 ended the day lower.

Notable winners as of 21:00 UTC (4:00 p.m. ET)

• Algorand (ALGO), $2.08, +1.0%
• Polygon (MATIC), $1.39, + 0.5%

Notable losers:

• Cardano (ADA), $2.42, -4.4%
• Polkadot (DOT), $35.07, -4.3%