Crypto exchange Kraken has recently released its new report explaining what is happening in the cryptocurrency market this month. The Kraken Intelligence report uses several on-chain fundamentals for Bitcoin and altcoin projects. Thus, it shares where assets stand in the current market scenario. Let’s examine together.
Bitcoin enters oversold territory
Amid the solid crypto market correction in the second quarter of 2022, the market sentiment has turned to extreme bearish. The broader market outlook remains pessimistic, while the global macro environment remains extremely weak. Most Wall Street investors are betting on Bitcoin correcting another 50 percent from the current price. This means that the price could drop to $10,000. BTC moved above $20,000 last week. Then it came under selling pressure once again. For the past few weeks, Bitcoin has been trading below its 200-day exponential moving average (EMA). This can be a good savings point for long-term investors.
Also, Bitcoin’s market cap-to-realization (MVRV) z-score shows that the world’s largest cryptocurrency is trading in oversold territory. After the last correction, Bitcoin’s MVRV z-score fell below 0. This reveals that BTC is in the oversold territory. However, the current score has historically been a strong support. It is possible for the MVRV z-score to enter the neutral zone above 1 with the recovery in BTC price. If it stays there, it will mean increased network demand. The Kraken report states:
There is still room for BTC’s MVRV z-score to drop before hitting the lowest levels recorded in the 2015, 2018 and 2020 bear markets. Its current reading, however, shows BTC falling to $3,900 in its early stages. That is, it is fast approaching the lowest levels recorded in March 2020.
Bitcoin and this altcoin are doing well in market dominance
Total market dominance tells us about the rise or fall in demand for crypto assets. Also, comparing BTC price to other altcoin projects helps us determine how dominance is changing. Bitcoin (BTC) was the only cryptocurrency to increase its market dominance to date. This was because even the top altcoins experienced steeper corrections compared to Bitcoin. Take a look at the chart below to understand the overall picture.
Avalance (AVAX) witnessed its market cap dominance drop by more than 55 percent. This was because LUNA Foundation Guard (LFG) had over 2 million AVAX tokens in its treasury. During the collapse of the Terra ecosystem, LFG had to liquidate all AVAX reserves. Whi;e Ethereum’s dominance is down 26%. Additionally, other Tier-1 competitors such as Solana (SOL) faced a sharp 48% drop. Cardano (ADA) is doing relatively well with 8% market dominance.
Bitcoin and Ethereum transaction fees drop
Transaction fees help us understand market demand. They show the costs that market participants are willing to pay to include a transaction. Some Blockchain networks like Solana, Algorand, and Cardano have static fee rates. However, for Blockchains like Bitcoin and Ethereum, the transaction fee varies according to demand. According to Kraken data, there is a sharp drop in transaction fees for Bitcoin and Ethereum. There was a 57 percent drop in Bitcoin transaction fees. However, that’s less compared to the leading altcoin project, which is facing an 87 percent drop. So the data shows that Bitcoin network demand remains relatively strong.
These two altcoins are experiencing increases in volume and active addresses
Network throughputs are an important metric to gain insight into active users and network demand. Daily transaction volumes are declining this year for many of the top blockchains. However, the uptrend continues for Cardano (ADA). Cardano has seen a 218 percent increase in on-chain transaction volume this year. This was because of several important developments that occurred in Blockchain. The launch of DeFi exchange SundaeSwap has also contributed to increased on-chain trading volume. However, there is no specific growth factor behind the increase in on-chain transaction volume.
Daily active addresses help us understand network demand among new market participants. Accordingly, the increasing number of daily active addressees indicates strong demand. Among all altcoin projects, Solana has a great lead with 87 percent in daily active addresses. However, Bitcoin’s daily active addresses have only increased by 3 years to date.
The circulating supply for any cryptocurrency allows us to assess its liquidity on-chain. According to Kraken: “The metric shows that altcoin projects are unlocked when minted by the protocol”. So this data point helps us understand the supply dynamics of a crypto asset. “An immediate marketable supply flow can suppress market activity,” Kraken says.
As we reported as Kriptokoin.com, NEAR is the leader with the increase in circulating supply remaining at 20 percent. It is followed by Avalanche (AVAX) and Solana (SOL). All these on-chain indicators provide a clear view of how Blockchain networks are performing during the strong bearish sentiment. Market sentiment continues to decline. However, some long-term investors continue to believe in Bitcoin and Ethereum.
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