October 7, 2022


Fine Art Of Business

Macro headwinds ‘are keeping traders on the sidelines,’ CoinDesk analyst says

4 min read

CoinDesk Market Analyst Damanick Dantes joins Yahoo Finance Live to discuss bitcoin’s slow start in 2022 and how retail traders are affecting crypto markets.

Video Transcript

All right, 14 minutes to the closing bell and a President Biden press conference, but we want to turn our attention to what’s happening in the crypto markets. And we’re going to do that now, me and Emily, as we bring you into the stream, Damanick Dante, CoinDesk Market Analyst. And it’s good to have you here.

For people who love Bitcoin, and we should always point out Bitcoin might be the granddaddy of them all, but there’s so many other ways to invest in crypto, Bitcoin though, has been volatile. And it’s recovering today. But you’ve pointed out to us the spot trading volume at its lowest level in six months. So for crypto investors, what does that mean?

DAMANICK DANTES: It just means that there has been less trading activity relative to prior highs. The prior high in volume we saw was around December 5. And that’s kind of when Bitcoin had a little bit of a jump and then kind of phased out. December was a rough month, and then coming into January, a little bit rougher.

So typically, you have the seasonal effect, where speculative assets like equities and cryptocurrencies tend to have a weaker start to the year in January. So we saw some of that seasonal headwinds come in. Of course you had macro headwinds come in as well. And those are keeping traders on the sidelines for now.

There’s been some talk about a possible short squeeze because leverage has been sort of skewed towards the short side and the Bitcoin options market. So we are looking for that around the 40k level is where we’ve been stabilizing. But for now, we’ve had a trend of lower highs since the November peak around 69k, So the trend is pretty much towards the downside. So any upside we see from here might be limited.

Damanick, this is Emily here. One other trend that CoinDesk has been pointing out is this rise in accounts or addresses that have a relatively small amount of Bitcoin, so between 0 to 100 Bitcoin over the past month. What does this suggest about volatility going forward and price action? Because we know at least in equities, that the rise in retail investors did drive some volatility last year. And is that the same for Bitcoin?

DAMANICK DANTES: Yeah, that’s been interesting. So typically, like you said before, when we see the retail traders come in, that typically creates some volatility, because they tend to be very short term in nature. They buy and they sell pretty quickly, rather than the larger account holders who hold about 100 1k BTC in their address. Those account holders don’t really have a lot of volatility. They tend to buy and hold for the longer term.

The interesting dynamic that we saw was that the shorter term holders or the retail traders have been accumulating Bitcoin through the price dips. However, the whales, or the larger Bitcoin holders, have been relatively stable. So there hasn’t been a lot of conviction behind the Bitcoin move like we’ve seen in prior bull runs.

So we need to see both participations come to play, the retail traders and the long term buy and hold investors. But for now, I think the long term headwinds from the macro point is keeping a lot of investors a little bit skittish and on the sidelines. So until we see some capitulation by the short sellers, the buyers might be coming back to enter probably at lower support levels, where they see more of a discount in terms of Bitcoin’s price.

For people who want to get into crypto, and I realize the prices of Bitcoin might be prohibitive unless you’re doing some kind of fractionalization, but should, when you’re looking at other cryptocurrencies, for instance, Solana, what are the differences that as an investor, who might be for the first time stepping into this, that I should consider as the differences between a Bitcoin and, say, a Solana? Or are they pretty much the same thing?

DAMANICK DANTES: Yeah, a lot of investors look at the use cases. So you want to see an increase in transaction activity and scalability over the long term. A lot of investors look to Bitcoin as a store of value, whereas these other tokens, like the Ethereum Killers, are looking for more efficient solutions on the blockchain, so that they can spur off activities such as decentralized finance and things like that.

So you want to really look at that use case and scalability potential that can increase the value over time. It’s tough to value these tokens. But that’s the general thing. It’s very early. And you have a lot of these players. So the best will win somehow. And you really look at it in terms of a portfolio. So also the altcoins tend to be more speculative, higher beta, little bit more risky. And then Bitcoin is the less riskier in the crypto space. So that’s how you kind of look at it in terms of relative valuations.

I wish you were there holding our hands and we were about to jump into the cryptocurrency assets. All the best to you. Damanick Dantes, CoinDesk Market Analyst. We look forward to you coming back here to Yahoo Finance Live.


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