Bitvavo Market News - Correction with a hopeful ending

Bitvavo10 set 2024

For many investors, the malaise felt in financial markets is lasting longer than expected. This is particularly true for those heavily invested in altcoins, where losses are significant. In such challenging times, they seek out asset classes that can weather the storm. Where has the attention fallen this week? DePIN. More on this in this edition of Bitvavo Market News.

Market update

The past week has presented two contrasting phases. From Monday to Friday, prices fell sharply mirroring stock markets worldwide. Bitcoin reached a low of €47,500 on Friday evening, the lowest point since the turbulent decline of August 5. The overall sentiment was gloomy and pessimistic.

On the other hand, several coins found support at key price levels, such as ETH at €1,950 and SOL at €111. This led to a bullish divergence; a combination of lower closing prices and higher values on momentum indicators. This suggests the downtrend may be losing strength.

Below is the weekly Bitcoin chart in dollars. The 50-week moving average is an early separation between bull and bear markets. Last week's weekly close is just above this point. As long as the price stays above $38,500, the series of higher highs (HH) and higher lows (HL) will remain intact. In short, it has been a painful week with a glimmer of hope towards the end.

The crypto market correction has lasted for almost six months now, and this is a disappointment for many investors who expected a continuation of the upward trend much sooner. The situation feels even more frustrating with gold and stocks repeatedly hitting new records in recent months.

Solana's price is now down approximately 40% from its March peak, however, most investors will not have bought right at the peak. They are looking at a smaller loss or even a big profit. The chart below shows that the price is 600% higher than a year ago. On September 11, 2023, the price was €16.

The €111 level has played an important role this year, first as resistance, then as support. It is not often that a level is tested so often, and experts disagree whether this makes the level stronger or weaker. Nevertheless, it is an interesting indicator to keep an eye on!

Featured

DePIN commands attention

In times of poor market performance, investors often look for asset classes that are outperforming others. In the crypto world, there are handy analysis tools for this, such as those from Artemis Analytics. For the period from early June to late August, the pattern appears as follows:

Performance of different asset classes over the past three months (source )

It is striking that in this period almost all categories have underperformed. If we also look at the beginning of this year, a different picture emerges. And if we look back 12 months, almost all categories show a slight gain.

On social media, DePIN is being singled out as a strong performer. Admittedly, the fact that the category only decreased in value by 6% in the measurement period is quite impressive. But what actually is DePIN?

DePIN stands for Decentralized Physical Infrastructure Networks and is a relatively new phenomenon in the crypto world. The idea behind DePIN is to decentralize physical infrastructures such as data centers, energy supplies, telecommunications and even transportation networks using financial incentives, game theory and blockchain technology. Instead of one central entity controlling this infrastructure, control is shared across a network of users.

A well-known example of a DePIN project is Filecoin, which incentivizes users to make their unused storage space available in exchange for a reward.

Filecoin is at the top right of this sector map in the Storage Networks category (source:Messari)

In theory, DePIN is a game changer that provides lower costs, improved efficiency and more democratic access to essential resources such as energy and data storage. In practice, while there are examples that support these claims, it has proven challenging to consistently attract enough participants to reach the scale required to fully realise DePIN's benefits.

Let's return to the impressive performance of this asset class, because there is a (possible) catch. Take the categorization of Artemis, for example. Under the DePIN category, they only track four assets: Helium, JasmyCoin, Hivemapper and IoTeX. Three of them are relatively small, with total market caps of less than a billion. JasmyCoin, which markets itself as 'the bitcoin of Japan', made a big comeback earlier this year and has thus had a relatively large impact on the performance of the Artemis category.

Even so, this research method can be useful as a starting point for investment decisions. For contrarian investors these are certainly interesting times. One of the most well-known in this category is probably Nathan Rothschild, a nineteenth-century banker who is credited with saying: “the time to buy is when there's blood in the streets”.

In other news

The three largest Japanese banks to use stablecoins for cross-border payments through a joint initiative called Project Pax. This will not involve the use of public stablecoins, but a private network between financial institutions. In this way, it will compete with services like Ripple and Agorá, a project started by the BIS for transactions between central banks.
Bitcoin and ether funds share in crypto malaise. Over the four days that the US stock exchanges were open, investors withdrew around $700 million from bitcoin ETFs. Ether funds had to make do with an outflow of around $250 million, and Grayscale (GBTC) and Fidelity (FBTC) were the biggest losers. Despite this, bitcoin funds still have almost 50 billion dollars under management, which is an astronomical amount for such a young ETF category.
Zürcher Kantonalbank launches services related to bitcoin and ether. Switzerland's second-largest bank announced in a press release that it will initially only deal with the trade and storage of cryptocurrencies. These services will be available to both direct customers and third parties. The products are fully integrated into the bank's applications and can be used via both internet and mobile banking. The bank, which employs 6,000 people, manages assets exceeding 400 billion euros.
Polygon's MATIC token has been renamed POL. The migration was completed a year (!) after it was first discussed in the Polygon community. Investors who hold MATIC tokens on another network such as Ethereum, can migrate them to the new name here. The name change also marks a policy change: the aim for the coming decade is to target an inflation rate of 2% to encourage network usage.