Crypto traders avoid risk and shelter in stablecoins as the market reaches a turning point

Glassnode, an on-chain analytics company, released a report indicating that investors are moving their funds to safer investments such as stablecoins and Bitcoin. Technical analysis suggests that altcoins are at a critical juncture, poised to either make a positive or a negative breakout.

Analysis conducted by Glassnode of Uniswap and futures trading volumes indicates that the upward trend that began in the first quarter of 2023 started to subside in April, likely due to regulatory worries and a lack of liquidity, leading to traders taking on more risk-averse approaches.

The report indicated that although it seemed memecoins had caused a spike in Uniswap’s trading activity, a more detailed examination of Uniswap’s pools showed that the majority of the volume was for major digital currencies such as Wrapped BTC, Ether (ETH) and stablecoins.

Furthermore, sandwich attacks and bot trading were responsible for a considerable portion of the trading activity. The report stated:

Considering the fact that many bots are involved in arbitrage or sandwich attacks, it is likely that more than two-thirds of all decentralized exchange (DEX) activity is attributable to organic trading volume on Uniswap.

In May, the trading volumes for Ether on centralized exchanges decreased, with the 30-day average trading volumes falling to $12 billion a day compared to the yearly average of $21.5 billion.

Analysts from Glassnode suggested that the decrease in futures trading volumes is indicative of “low institutional trading activity and liquidity.”

The contrast between the Bitcoin (BTC) perpetuals and the Ether perpetuals in terms of market share is striking, with Bitcoin having a 65.5% control. In 2022, the two assets had an equal presence in the perpetual swap sector; however, the pattern has changed drastically over the last year.

Tether (USDT) has taken in a large portion of the money leaving Binance USD (BUSD) and USD Coin (USDC) which has led to USDT reaching a record-breaking supply of $83.1 billion.

Recently, capital in the crypto market has been shifting away from high-risk altcoins and towards more secure assets such as stablecoins and Bitcoin, instead of flowing from major coins like Bitcoin and Ether into altcoins as is usually the case.

Bitcoin’s relative strength versus altcoin price momentum

In 2023, Bitcoin’s dominance percentage in the cryptocurrency market, which is calculated by its market capitalization in relation to the total crypto value, increased before it hit a resistance at 48.35%.

If Bitcoin buyers fail to surpass the resistance level, an altcoin rally in comparison to Bitcoin may be anticipated in the market.

Conversely, the TOTAL2 chart, which gauges the market capitalization of the cryptocurrency market excluding Bitcoin, saw its positive breakout from the triangle pattern reversed, causing the index to retreat back into the bearish triangle pattern that began forming in October 2022.

Ethereum gas fees have decreased following the memecoin frenzy of May.

At present, the overall market capitalization of altcoins is limited by a downward sloping triangle pattern with diminishing highs and a parallel support line of $433.39 billion. If this level is breached, selling pressure is expected to intensify.

Should buyers manage to establish support above the parallel resistance of $616.35 billion by the end of the week, altcoins may continue to move up in the following weeks.

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