The crypto market continues to be hit by storm waves, responding to the situation the OKEx team provides a comprehensive understanding of the company’s perspective on market developments and their impact on the company’s operations.
The OKEx team represented by Robbie Liu as Market Analyst at OKEx, Hunain Naseer as Senior Editor at OKEx Insights, Richard Delany as Senior Analyst at OKEx, and Jay Hao as CEO of OKEx gathered to provide a detailed and in-depth overview and response to the crypto market situation. at the moment.
Here are the QnA results from the OKEx Team.
Opinion From OKEX Team Regarding Current Crypto Market
Q: Bitcoin has performed very well over the last few months, but suffered a sudden drop in a matter of hours. What changed?
Robbie Liu, Market Analyst: While a drastic drop occurred in a matter of hours, BTC’s price action stagnated recently and failed to break through or hold above $60,000 for about 10 weeks. This persistent resistance is putting pressure on investors, and recent news developments have fueled the sell-off. The initial decline was a result of market sentiment turning bearish, which then worsened as billions of leveraged longs were liquidated simultaneously.
Apart from the high leverage, the meme coin frenzy has also attracted many traders so that Bitcoin and mainstream cryptocurrencies are starting to lag behind. This then caused Bitcoin’s dominance to fall to its lowest level of 40% during this bullish move, but also signaled the market could soon reverse direction.
Q: In a recent OKEx Insights report, it was indicated that Coinbase’s market listing was one of the factors causing the decline in interest in BTC. Can the team sum up these sentiments?
Hunain Naseer, Senior Editor: The Coinbase listing was a hugely popular event and was seen as the catalyst for BTC to set a new all-time high. However, as is common in the crypto world and in other speculative markets, traders take positions before the market goes up and take profits immediately before the main event and shortly after. The same thing is seen in this case, where buying action is seen before the listing and selling pressure appears after the listing.
Q: Explain more about the correlation between BTC, ETH and other traditional global assets.
Hunain Naseer, Senior Editor: In the last few weeks, the correlation between BTC and ETH has weakened as BTC stagnates while ETH continues to print new all-time highs above $4,000. The same thing happens to altcoins, despite being at a lower level, altcoins follow ETH but are not completely independent of BTC. In terms of correlation with traditional assets, BTC and tech stocks are highly correlated these days where any big sell in the sector also affects the price of BTC.
Q: Regarding US Treasury yields, it is logical to state that low yields will encourage investors to look for alternative assets, such as Bitcoin. However, in recent months, the yield appears to be getting better every day with a healthy spread between the short and long term. However, BTC continued to maintain a decent price level, even recovering for a while before falling. How do you interpret this?
Robbie Liu, Market Analyst: Since the pandemic began last year, the Fed has prioritized a fiscal stimulus package and asset purchases that pushed Treasury yields to nearly zero. However, the minutes from the April FOMC meeting disclosed last Wednesday hinted at the possibility of tapering.
As a result, the three major US stock indexes plunged around 1% on Wednesday which also coincided with the fall of BTC. BTC bottomed out at the same time as the S&P 500 around 13:00 UTC (20:00 EDT) after dropping below $30,000. Meanwhile, the yield on the 10-year US Treasury set a new daily high by rising nearly 4 basis points to 1.6762%.
The market reaction illustrates that Bitcoin is currently a risky asset along with equities, and both will be re-evaluated with rising interest rates. It will take time for the market to adjust to possible changes in interest rates. Historically, Bitcoin has gone through rate hikes and rate cut cycles, and more importantly Bitcoin performs better when the market Volatility Index hovers at low levels.
Q: The crypto market frenzy of the last few weeks that led to this week’s “landslide” is sure to cause confusion in the trading community. What effect will this event have on OKEx operations?
Jay Hao, CEO: Given the stagnant price movement during mid-May, we saw a decline in community engagement, however we also saw an increase in trading volume and participation in various campaigns as market participants tried to profit from lower prices.
Q: Ethereum is one of the top performers and its rise is good for the altcoin ecosystem. Can you explain what the upcoming implementation of ETH2.0 means for the market?
Richard Delaney, Senior Analyst: Among other changes, ETH 2.0 looks to radically increase Ethereum’s transaction capacity. If implemented successfully, the scalability benefits of data sharding will drive further growth of the DeFi and NFT sectors, and could also enable new, innovative sub-industry as familiarity with technology deployment.
Similar to BTC price action in the weeks before and after the summer 2017 hard fork, it is likely that we will see increased ETH price volatility around key transition dates. While changes are widely accepted throughout the community, each major upgrade brings up many unknowns, which will probably be reflected in the price of ETH.
After the transition, there may be a sudden growth in the amount of ETH staked in the network as well. The currently staked ETH cannot be cancelled. Therefore, staking today requires confidence in the successful launch of ETH 2.0. Although approximately 4.8 million ETH has been staked, it is common to assume that many users will wait until the upgrade is successfully completed in order to fund the altered network security.
Despite the recent price volatility, a number of complementary factors favor higher ETH prices at least in the medium term. In addition to scaling the network to accommodate more users and removing ETH from the market via staking, the EIP-1559 looks set to significantly reduce the selling pressure of Ethereum miners by burning the bulk of transaction fees.
Q: What is the impact of increasing transaction fees on the Ethereum network on trading pairs ETH/Crypto or Fiat and ERC20/Crypto or Fiat? How will it affect activity on the OKEx platform and what does it mean for the future of ETH?
Richard Delaney, Senior Analyst: The increase in transaction fees has clearly discouraged people from using the Ethereum network. Complex transactions involving the DeFi protocol or NFT printing can quickly become very expensive on the underlying blockchain, leading to the impression that Ethereum is a playground for the rich.
The recent growth of Ethereum bridged and layer-2 blockchains offering lower transaction fees suggests there is a strong desire for a lower-cost version of what Ethereum has to offer. As the scaling technology improves with solutions like Polygon and ETH 2.0, Ethereum’s superior liquidity and other network effects are likely to attract many new users and pull some users back from the “Ethereum killer”.
Q: How do you view BTC and ETH in the coming months? Are there any warning signs traders should look out for?
Robbie Liu, Market Analyst: Looking back on the bull market from 2016 to 2017, Bitcoin hasn’t lost ground for three months in a row. Given this, it should come as no surprise that the market rallied in June instead of printing another red month. But expecting a quick rally to return above $60,000 might be too idealistic. Bitcoin will still face a lot of selling pressure due to its previous bulk buying in the $40,000 to $60,000 range.
Bitcoin dominance fell from 40% before Black Wednesday, to a 3-year low since May 2018. We expect the dominance ratio to not drop below 40% in the coming weeks, which means investors will return to Bitcoin worried about another correction. Last week’s big retracement is still more likely to be a mid-cycle correction. On-chain data shows ‘smart money’ from whales is starting to collect coins again.
Bitcoin is currently increasingly correlated with macro events. Macro risks including the FED’s Tapering calendar and possible further Chinese regulation could be reasons to make traders sell again.
Q: Meanwhile, ETH L2 tokens especially MATIC have recorded impressive gains in the last few months. Will this trend persist?
Richard Delaney, Senior Analyst: The growth of MATIC in terms of both price and users following the project name change to Polygon earlier this year clearly demonstrates user demand for lower cost Ethereum DApps. With Polygon radically simplifying developer orientation to L2, it looks likely to remain relevant for some time to come.
Some question the relevance of Polygon post-ETH 2.0 as both address network scalability. However, it remains unclear when or even if sharding will be able to process the more complex computations required for smart contracts, Polygon and other L2s are expected to complement the upgrade rather than compete with it.
Q: What is OKEx working on at the moment? Can we expect some big announcements in the near future?
Jay Hao, CEO: OKEx is working to support direct deposits and withdrawals to Ethereum Arbitrum scaling solution. We are conducting due diligence to estimate how quickly the integration can be implemented once the Arbitrum mainnet goes live. Apart from this, stay tuned for updates from popular listings and OKExChain, stay tuned!