10 January 2025

It’s been a testing start to 2025. Bitcoin hasn’t held its $100K level and is seeking support around $92,000. Altcoins have bled as a group with the total crypto market cap tracking near $3.3 trillion.

What led to this volatility in the market? And more importantly, is this a dip worth buying? Let’s find out today.

Top-3 stories of the week:

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The newsletter is put together by Giottus Crypto Platform. You can read all the previous issues of Cryptogram here.

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WEEKLY MACROS

• Total crypto market cap - $328 trillion - DOWN 3.5%    

• Bitcoin price - $94,018 - DOWN 2.5%

• The dollar index (DXY) - 109.35 - UP 0.2%

• Bitcoin Dominance - 58.04% -  UP 0.8%

• Crypto Fear and Greed Index - 50 - Market is in Neutral state

THE HOT TAKE

Time to buy the dip?

In a bull market, declines of 20-30% are often the best times to lock capital in. As we hit one such dip, let us look at factors that are contributing to the volatility.

Spike in US treasury bond yields

Treasury yields are closely watched as they influence borrowing costs, investment decisions, and overall economic conditions. Many on Wall Street had expected the US Fed’s multiple rate cuts to drag yields lower. Instead, on Wednesday, the yield on the 20-year note touched the rare psychological level of 5%.

Higher yields often lead to lower stock market valuations, as they make bonds more attractive relative to equities. Moreover, these high yields often tighten financial conditions, reducing liquidity in markets. Crypto tends to suffer in low-liquidity environments.

Stronger US jobs data

The US job openings data, reported at 8.1 million, significantly surpassed the consensus estimate of 7.6 million. The robust labor market reduces the likelihood of further rate cuts in the near term. Tighter monetary policies often putting temporary downward pressure on assets like Bitcoin and altcoins.

Notable ETF outflows

According to data from Farside Investors, Bitcoin ETFs saw a sharp reversal on week, with $569 million in outflows, breaking a three-day streak that had brought nearly $2 billion into these funds. This marks the largest outflow since December 19, when $680 million exited the market.

Rumours of liquidation of Silk Road BTC

The crypto market faced increased bearish pressure amid a tweet from DB News suggested that the US government has received approval to sell 69,370 BTC, valued at $6.5 billion, from its Silk Road seizure. This move could significantly impact the market, given the scale of the liquidation.

This news comes during a political transition in the U.S., as President-elect Donald Trump prepares to take office on January 20. For context, Trump has stated he would not sell any of the Bitcoin held by the government, which, according to Glassnode, totals 187,236 BTC.

Bullishness prevails as sentiment

While macroeconomic events have led to a significant pullback in Bitcoin and the broader crypto market, on-chain data indicates that the Bitcoin bull run is far from over. Bitcoin hasn’t yet reached the extreme euphoria phase seen in previous market cycles. One key indicator, the MVRV (Market Value to Realized Value) ratio, has not surpassed 3.2 in this cycle, a historical signal of peak market excitement. 

The MVRV ratio compares Bitcoin’s current market value to the price at which it last moved, with readings below 1.0 signalling undervaluation (a potential buying opportunity), between 1.0 and 3.2 indicating healthy market conditions, and above 3.2 pointing to market euphoria and the potential for a top.

The current MVRV ratio stands at 2.97, which falls within the healthy market range, indicating that Bitcoin is still in a solid growth phase without reaching overexuberance. This suggests that, while the market may be experiencing some volatility, there is still room for further price appreciation before hitting the levels of extreme euphoria that often signal a market top.

Futures suggest room for growth

The futures market is showing signs of stabilization, offering some optimism for Bitcoin’s short-term outlook. Key indicators like the funding rate, taker buy/sell ratio, and open interest suggest that while volatility may be easing, there is still room for potential growth as market conditions cool off.

Funding Rates (0.0013): A positive funding rate at this level indicates that the futures market is moving toward stabilization, suggesting a reduction in extreme volatility.

Taker Buy/Sell Ratio: This ratio reveals that the market is relatively balanced, though buyers (long positions) maintain a slight dominance over sellers.

Open Interest: Open interest surged rapidly following macro news but has declined by 3.18% in the past 24 hours. This suggests that the overheated market is cooling off in the short term.

What does it mean for you, the investor?

This is exactly how crypto plays out. Everyone feels bearish for a while and when analysts position the market to undergo further correction, it surprises with considerable weekly rallies. Start loading your bags (especially the altcoins you always wanted). Any further dip will be transient – we know that Trump will be inaugurated in the next 10 days and that Jan.-Mar. is the best quarter of the year for returns.

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If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.