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Bitcoin DeFi Institutional investment Market Watch Weekly OKEx Insights

Crypto market struggles under pressure as BTC falls again and alts drop harder

2021.06.21 Robbie Liu

Bitcoin failed to show any signs of reversal and altcoin season appears to be reaching its end — Market Watch Weekly 

Since China's Sichuan province had ordered cryptocurrency miners to shut down their machines by June 19 midnight amid an ongoing Bitcoin crackdown, OKLink data shows that the Bitcoin network’s hash rate experienced a sudden drop to 122 EH/s, a decline of more than 30% from its historical peak of 181 EH/s on May 13. 

With the Bitcoin network likely to see a continued decline in mining difficulty for some time, BTC prices are expected to remain under pressure. Another big question is whether miners will dump their coins in the near future, and this concern has also greatly impacted market confidence. 

As the CME did not update its CFTC report as of Monday, we were unable to observe the latest institutional activities in the derivatives market. However, according to data provider ByteTree, the number of BTC held by various funds (European and Canadian ETFs with closed-ended funds) has dropped to 782,558 BTC as of last Friday — a significant reduction of more than 15,000 BTC in three days and the lowest level since Feb. 25. Clearly, institutional investors have been moving away from this highly volatile market, and it remains to be seen when they will return.

BTC held by funds — the European and Canadian ETFs with the U.S. and Canadian closed-ended funds. Source: ByteTree

On the price front, BTC did not see a rebound this past week, with prices falling back from 41,000 USDT to 34,000 USDT levels, a 9.8% one-week plunge, as per the OKEx spot price. On the daily chart, the 30,000 USDT mark will be an important level to watch, and a breakdown of this threshold could increase fear in the market. 

BTC experienced a 9.8% decline over this past week. Source: TradingView

Altcoin season appears to be ending

During the past week's downturn, altcoins have performed even more poorly. ETH, SOL and LTC saw declines of about 10%, while ETC and DOGE are down 15%. Even from a technical perspective, we can see lower highs being printed on charts for major altcoins. Such price movement indicates a breakdown of bullish sentiment. 

Weekly returns of major altcoins, 6/14 to 6/20. Source: TradingView

The Altcoin Season Index from BlockchainCenter declined from 86 to 76 over the same period, and it could now drop below the range for an "altcoin season." Due to the lack of market confidence, altcoins may see deeper corrections if BTC cannot hold the 30,000 USDT mark.  

Altcoin Season Index. Source: BlockchainCenter

DeFi couldn't stand out

Ethereum gas fees have plunged to a six-month low, indicating a gradual decrease in market activity. As a result, the total value locked in DeFi, denominated in USD, saw a decline from $62.8 billion to the current $53 billion, meanwhile, ETH locked in DeFi didn’t make any recovery. 

Aave ranked as the biggest protocol for another week with $11 billion in TVL, followed by Curve’s $7.2 billion and Maker’s $6.8 billion. 

Total value locked in DeFi. Source: DeFi Pulse

The only token that bucked the trend was 1INCH with a 12.7% weekly return. The native tokens of the big three DeFi protocols by TVL all saw more than 13% corrections. On the other hand, SUSHI and LUNA have shown some resilience, down about 3%. 

Weekly returns of major DeFi tokens, 6/14 to 6/20. Source: TradingView

Looking ahead this week 

The United States Federal Reserve’s FOMC meeting sent out a hawkish message last week, with seven members showing support for advancing the rate hike to 2022, and more than half of the members supported starting the hike in 2023. 

Since the rate hike can be expected to come sooner, the Dollar Index and the Volatility Index rallied sharply, while gold and equities saw quick corrections on Friday. 

This week, market participants will be closely watching comments by Fed Chairman Jerome Powell on Tuesday, when he is due to testify on policies before Congress.

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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.