S&P 500 Rises, Could Bitcoin and Ethereum Follow?

The calendar going into October hasn’t changed much for crypto price trajectories. Bitcoin and Ethereum have slipped mildly, and altcoins (outside of outliers like QNT, XRP, HT and MKR) have mostly suffered a bit more.

Social volume is also down and crypto enthusiasts continue to defect as the patience of traders hoping for a 2021 rebound continues to be tested.

Crypto investors are getting worried

CPI and PPI data were released last week, indicating further concerns about inflation and recession. We immediately saw an expected market crash on both the crypto and equity sectors as a result, which has been the case throughout every piece of data that made the FOMC likely to raise rates.

What was not so expected was the very quick return that took less time on duty. After Bitcoin was dumped to $18,300, it looked like a new wave of pain was coming for crypto hodlers and traders…

But just as the panic started to set in, both crypto and the S&P 500 bounced back almost instantly. The Bitcoin price has mainly hovered between $18,800 and $19,600 since then, and we are now starting to see calls for $20,000 again.

A break from this long-term correlation with stocks would be a good sign for cryptocurrencies.

Is Bitcoin Price Near Bottom?

A fascinating trend our team picked up on is the similarities between network realized profit loss between now and the turn of the year 2018 and 2019. From mid-November to mid-December 2018, the Bitcoin price (along with most crypto prices) fell by -49%. This, as you can imagine, caused huge realized losses across the network. The biggest drop we had seen to that point in terms of price.

Quite similarly, 2022 saw a -52% plunge in Bitcoin price between May 3rd and June 17th. And since this time, an eerily similar realized loss spike (relative to price) has appeared on the BTC network. In the four months since, this NRPL/Price calculation has remained negative, just as we looked into January 2019. History favors an increase under this type of pattern. Will it happen again?

Bitcoin and Tether whales aren’t convinced it’s time to jump back in, according to Santiment’s Supply Distribution data:

Addresses holding 100 to 10,000 BTC (represented by the yellow line) still hold around 45.7% of the asset’s total supply after holding 49.5% about a year ago. This 3.8% drop in holdings has been the key to the Bitcoin price not recovering from hitting its all-time high in early November 2021.

And Tether addresses (represented by the pink line) holding $100,000 to $10,000,000 aren’t showing much more enthusiasm. They held close to 59% of USDT nearly two years ago and now hold a staggering 29%, meaning they have dropped a little more than half of their supply. Not quite the trust from major stakeholders that we hope for.

BTC and ETH selling pressure is easing

But back to encouraging news – we see that both Bitcoin (in blue, below) and Ethereum (in purple, below) really haven’t seen a significant week of profit-taking since mid-September. This was of course the week of the ETH merge, which caused a ton of volatility in the markets.

Large high peaks in the chart above historically cause prices to fall as the effects of profit taking kick in. Meanwhile, big low tops are more indicative of bottoms as traders capitulate and weak hands drop out, opening the door for higher volume traders. in and buy their abandoned coins at lower prices. Both BTC and ETH, as we can see, have remained neutral or negative for the past month. That’s a promising sign.

However, one thing we still want to see improvements on for ETH, just like we covered for BTC, is the main stakeholders and their lack of accumulation. Look at the history of two halves over the past three months:

During the Ethereum rally against the Bitcoin price, we saw that shark and whale addresses with 100 to 1,000,000 ETH had collected 2.2 million Ethereum. During this time, ETH/BTC rose by +43%.

But since right before the ETH merge, the same addresses have been dumping supply in a huge way. 3.3M Ethereum has moved away from these addresses and ETH/BTC is losing its gains in unison.

For the many believers in Ethereum, a lot will determine how these important ETH addresses decide to behave between now and the end of the year.

Crypto market: trading behavior

And in terms of other trading behavior, our Sansheets models show some bias towards shorting for most of the current week so far. Both the funding rate of BTC (in blue) and an average of the top 150 altcoins (in purple) have favored bets against the markets for much of October. As long as this is the case, prices have a better chance of rising (and liquidating those shorts) than falling.

And finally, keep an eye out for whale deals right now. The higher the bars below, the closer the altcoin $100k+ transaction numbers are to their respective three month highs. And when we see large anomalies in whale transactions, it usually indicates at least a temporary price reversal. ANKR, BAT, GALA and QNT are among some altcoins that are seeing large transactions happening at the time of writing!

Calculations point to reasons to be more optimistic than we have been able to be for some time. But 2022 has been a year to be deceived many times. What will really trigger the next bull run is when optimism no longer exists and a bearish narrative is the overwhelming majority of timelines and suggested videos.

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