The state of crypto – February 2023

Immediately upon interacting with a blockchain, much data becomes publicly available on a public ledger. Analyzing this data may provide crypto traders and investors with helpful insight into the present state of the market. In “The state of crypto”, we take a look at the most important metrics to observe the market based on transaction and trading activity. Our main focus is the two largest cryptocurrencies Bitcoin and Ethereum, and we divide the metrics into short-term and long-term indicators. You find the report for the last month here.

Short-term

The prices of Bitcoin and Ethereum have increased by around 38% and 36% year to date, respectively, as the risk-on sentiment was revised across asset classes, following wide-ranging confidence that the FED and other central banks sooner rather than later put an end to interest rate hikes and quantitative tightening.

It appears that the substantial upward price move between the 10^th to 14^th of January caused some holders to deposit Bitcoin and Ethereum to exchanges likely to take profit, given that the exchange inflow surged in that period. Since this spike, the daily inflow has been on a constant downward trajectory, although the prices have increased further since the surge in mid-January. This may indicate that weak hands have already taken profit, potentially indicating limited resistance at these levels, as stronger hands are not interested in selling at these prices. As a matter of fact, long-term holders did not attract much attention on-chain in January, as not much dormant supply moved, stressing that the price increases are not of importance to them.

The limited exchange inflow has caused the total exchange balance to decrease slightly in the past couple of weeks, with the latter often indicating less willingness to sell crypto. To be fair, though, it may merely be a continuation of the outflow trend of the last couple of months in which holders have minimized counterparty risks by withdrawing from exchanges, upon the collapse of FTX.