■ Market: Cryptocurrencies

■ Assets: Bitcoin

The massive increase in money supply in Western economies has created unprecedented demand for hard assets. Bitcoin may be the hardest asset in the world, as its supply is strictly limited to 21 million units. This helps explain the Bitcoin surge we’ve seen over the past year.

Now, caution is needed, as the Bitcoin bullish trend is showing signs of exhaustion. While the macro environment remains favorable for digital currencies, we may see a significant short-term correction, especially among altcoins.

Bitcoin Bullish Trend Showing Signs of Exhaustion

After an extraordinary year that took Bitcoin from $7,000 in April 2020 to $66,000 in April 2021, BTC is now showing clear signs of trend exhaustion. Meanwhile, BTC adoption and network security are at all-time highs. So, what has changed? Here are some reasons explaining Bitcoin’s trend exhaustion:

1. Profit-taking, as Bitcoin has gained over 1,400% since March 2020.

2. In early 2021, Bitcoin’s market cap surpassed the iconic $1 trillion mark for the first time.

3. Bitcoin has had six consecutive profitable (green) months, a first in its history.

4. Bitcoin’s dominance in the crypto market showed signs of weakness, with investors moving to Ethereum, which offered higher upside potential.

5. Many bubbles have formed in the altcoin market, which is not a positive sign for the overall industry.

6. Recently, India and Turkey legislated against Bitcoin use in their countries.

7. The new US capital tax proposal was released just a few hours ago.

Read more: Bitcoin Trading Signal April 2021

Understanding a cryptocurrency’s utility and its current level of adoption is an essential step when investing in the right projects. The following web tools are useful for researching cryptocurrency networks.

RESEARCHING LAYER-1 CHAINS

Layer-1 crypto projects are independent blockchain networks that can process, validate, and finalize transactions without relying on another network.

Examples of such networks include Bitcoin, Ethereum, Solana, Avalanche, Binance, Cardano, Polkadot, Cosmos, and others. These blockchains are crucial for the crypto industry, as they provide the infrastructure for building applications and creating advanced ecosystems.

Researching Layer-1 Projects

The following tools can help investors evaluate the utility and adoption of various Layer-1 projects:

Read more: Essential Tools for Researching Cryptocurrency Projects

Ethereum 2.0 Upgrade is Reshaping and Decentralizing the Global Financial System

Currently, Ethereum is leading the decentralized finance (DeFi) revolution, holding over 95% of the market share. However, the network’s existing structural limitations created the need for a major upgrade in 2021.

This upgrade, called Ethereum 2.0, aims to make the network more secure, cheaper to use, and capable of handling thousands of transactions per second.

Introducing Ethereum and Ethereum 2.0

Launched in 2015, Ethereum is an open-source software platform incorporating decentralized applications (dapps) and smart contracts. Ethereum is the most actively used blockchain in the world and the second most valuable in terms of market value (after Bitcoin). These are some key Ethereum numbers:

• Hundreds of thousands of users and tens of thousands of developers (about 3,000 dapps are built on Ethereum)

• Leading the revolutionary Decentralized Finance (Defi) with a market share of over 95%

• Over 25 billion USD is currently locked in Ethereum’s DeFi -Check here the Total Value Locked in DeFi

The native cryptocurrency of the platform is Ether (ETH). Ether works as the transactional token for the operation of smart contracts and dApps.

Read more: Ethereum 2.0 Upgrade -How ETH is Revolutionizing the Financial System

Understanding Open Interest in Futures and Options Markets

Open interest shows whether money is flowing in or out of the derivatives market, and it is a reliable early indicator of Bitcoin’s mid-term trend.

Explaining Open Interest

Open interest refers to the total number of derivative contracts (futures or options) that remain open at the end of the trading day. The number of outstanding futures or options contracts is not fixed and changes daily as some traders open new positions while others close theirs. In short, open interest shows the total number of futures or options that have not yet been settled.

□ Open interest measures the number of open contracts, not the sum of both buys and sells together

□ Open interest changes only when a new position is opened or an existing position is closed

What does open interest show? 

□ Shows general market sentiment across different asset classes (equities, crypto, etc.)

□ Indicates money flowing in or out of the futures and options market

□ Shows the level of market liquidity

Read more: Open Interest and Bitcoin Markets

Explaining BitMex Perpetual Contracts and Crypto Funding Rate

A Perpetual Contract trades like a Futures Contract, but never settles and never expires.

What is a Bitmex Perpetual Contract? 

Bitmex Perpetual Contracts are derivatives similar to traditional Futures Contracts. They allow crypto traders to speculate on both upward and downward price movements of a cryptocurrency. Compared to standard Futures Contracts, they have the following differences:

• Perpetual Contracts don’t expire (there is no daily settlement)
• The price of a Perpetual Contract trades significantly closer to the underlying Index Price compared to a similar Futures Contract
• The primary price-spotting mechanism of a Perpetual is Funding. This mechanism allows the perpetual contract to be priced very close to the price of the spot market (explained briefly below)

Read more: BitMex Perpetual Contracts and Crypto Funding Rate