PEPE bounces back

April 15, 2024

Reading time: 5 minutes

Bitcoin’s ‘normal drop’ leads to $256M longs liquidated- Analysts

Key points:

  • Approximately $1.05B in short positions were at risk should Bitcoin prices revert to $67,000

  • The global crypto market shrunk by 8% but has since begun to recover

News - Bitcoin prices faced intense selling pressure on Friday and Saturday, falling 14.53% at the lowest point of $60,600 before bouncing higher. This caused $256M in long positions liquidated.

Analysts maintained that it is normal for Bitcoin to experience 20% corrections during a bull market. “So far, this is a normal drop,” said Benjamin Cowen on X (formerly Twitter), adding that we have had several such corrections this cycle.

Another analyst who goes by the name RektCapital imparted wisdom that comes with the experience of multiple Bitcoin bull cycles. “Bitcoin will retrace deep enough to convince you that the bull market is over, and then it will resume its uptrend”, he noted in a post on X.

Market-wide repercussions - The global crypto market had fallen 8% to reach $2.23T on Sunday, but at press time it stood at $2.43T. The wave of selling brought panic with it.

Bears who were late to the party, or were greedy, might be punished should Bitcoin swing higher. It was estimated that a whopping $1.05B of short position liquidations would occur if prices reached the $67k mark.

Miner impact - Examining the past Bitcoin cycles revealed that miners tend to stock up on BTC leading up to the halving. The subsequent supply/demand imbalance and rising prices would be to their benefit.

After the halving, miners could potentially liquidate $5B worth of Bitcoin, observed Markus Thielen, head of research at 10x Research. The aftermath of the selling pressure could see BTC prices move sideways in the coming months.

Altcoins are likely to take the biggest hit. According to him, the altcoin rally typically begins six months after the halving event.

Key points:

  • New entrants to the Chainlink network are a sign of increased adoption and could drive demand higher

  • It is not a coincidence that Chainlink’s positive developments came after the recent integration with Ethereum [ETH]

News - Chainlink witnessed a change in a long-term decline in the number of new addresses on 11 April. The influx of new users was a bullish catalyst for the network.

On this day, Chainlink announced that the Cross Chain Interoperability Protocol (CCIP) was extended to Ethereum and some Layer-2 networks under the blockchain, such as Arbitrum and Optimism.

Analyzing the domino effect - The CCIP announcement was not the only reason behind the increasing number of new addresses. Further investigation revealed that the smart contract supply went up from 52% to 53.1% in April.

This meant that more LINK was locked in decentralized applications. Hence, the CCIP has allowed further development of smart contracts and made it possible for LINK holders to bridge their assets to other chains.

Chainlink prices struggle to recover - The short-term market sentiment was firmly bearish. Even though Bitcoin prices bounced significantly from Sunday’s lows, LINK was not as successful.

Examination of exchange flows on Santiment revealed that the exchange inflows far outweighed the outflows over the weekend. This implied that the selling pressure was not yet at an end, and accumulation had not begun in earnest. Until it does, LINK bulls would likely have a hard time driving prices higher.

Gold-backed PAXG token spikes to $2.9k amid geopolitical tensions

Key points:

  • Bitcoin traded at a perfect negative correlation to PAXG, highlighting crypto weakness

  • The markets being closed over the weekend meant the PAXG token was trading at a premium to gold’s Friday prices

News - PAXG, the gold-backed digital asset created by Paxos, saw a flurry of demand as events in the Middle Eastern theatre threatened to escalate further.

Investors flocked to safe-haven assets but with traditional markets, including gold’s, closed, the digital token was the preferred candidate. Curiously, PAXG is the world’s second-largest tokenized gold coin. Tether gold (XAUT) stands first on the list but did not see as much of a surge.

Data showed that PAXG reached $2923 on Saturday, a 20% premium over gold’s per-ounce price of $2342.9 at Friday’s New York close.

Geopolitical tensions and crypto - The crypto market was under pressure after Iran retaliated for a suspected Israeli attack earlier this month. Bob Elliot, a former Bridgewater Executive, said that this was proof that Bitcoin is not a geopolitical hedge.

“BTC traded with a near-perfect negative correlation with PAXG” on Saturday, a gold-backed token. This was evidence that investors would rather hold safe-haven assets than risk-on assets like Bitcoin.

IRS investigation chief expects uptick in crypto tax evasion this year

Key points:

  • The IRS is preparing for an uptick in crypto financial crimes and has become more aggressive

  • IRS special agents to collaborate with experts from blockchain analysis firm Chainalysis

News - The U.S. Internal Revenue System (IRS) is anticipating a large increase in crypto tax in the future. With 15 April being the deadline for U.S. citizens to file their taxes, the agency expects more cases of tax evasion and fraud.

“There’s going to be a lot more charged Title 26 crypto cases this year and moving forward”, said IRS criminal investigation chief Guy Ficco.

Title 26 and the IRS measures - A Title 26 tax code refers to citizens who willfully evade taxes by obfuscating documents or lying.

Ficco mentioned the IRS’ partnership with blockchain analysis firm Chainalysis and other law enforcement agencies to deal with crypto crime more effectively.

He said that the agency has grown more aggressive in investigating citizens who failed to report their crypto taxes or otherwise lied in their tax returns.

The increased aggression toward crypto came down to the fact that there was an uptick in “pure crypto tax crimes” where previously crypto had been more of a tool that enabled financial crimes such as fraud, scams, and money laundering.

Did you know?

  • On August 15, 2010, Bitcoin faced a huge bug - and 184 billion BTC were created out of thin air. The BTC supply is supposed to be capped at 21 million, but an integer overflow (which happens when a calculation tries to store a value in a variable that is larger than the available space) allowed an unknown attacker to create a ridiculous amount of Bitcoin. The issue was noted in 90 minutes and a fix was rushed in.

  • On the Ethereum network, users need to post a base gas fee, which is the minimum amount of gas required to include a transaction on the blockchain. In most cases, they also post a “priority fee” or a tip on top of the base fee to incentivize miners to confirm this transaction above others, making the transaction faster for the user.

  • Solana is capable of a throughput of 50,000 transactions per second (TPS). By comparison, Ethereum averages 15 TPS, with a maximum recorded speed of 62.

Top 3 coins of the day

ONDO

Key points:

  • ONDO has bounced nearly 55% in the past 48 hours from Saturday’s low

  • Indicators showed a shift in momentum in favour of the bulls

What you should know - ONDO, alongside the rest of the altcoin market, saw severe selling pressure on Friday and Saturday that measured 35% from tip to toe on the two days. Since then, the buying volume has surged. Sunday and Monday saw trading volume comfortably exceed April’s average volume. Additionally, the RSI rocketed above the neutral 50 level to signal bullish momentum in the 12-hour timeframe. Similarly, the Chaikin Money Flow’s (CMF) reading of +0.27 at press time denoted significant demand for ONDO in the market. The $1.05 and $1.2 are the next key resistance levels to keep an eye on.

Solana (SOL)

Key Points:

  • SOL has defended the 78.6% Fibonacci retracement level

  • The rising A/D indicator showed recovery was viable

What you should know - Solana prices fell out of a bullish pennant pattern on the 10th of April. For a few days, prices tested the trendline as resistance, before the recent chaos galvanized SOL bears into action. They forced a move to $116 on Saturday, but Solana has partially recovered from the dump. At press time, it was just below the psychological $150 level. The Awesome Oscillator showed that bearish pressure was dominant, but also reflected short-term bullish momentum in the past 24 hours. The Accumulation/Distribution indicator trended higher throughout SOL’s retracement, signalling buying pressure was prevalent. This could see the token recover quicker than most other altcoins.

Fetch.ai (FET)

Key points:

  • Fetch.ai has a bearish technical structure on the lower timeframes, showing potential for more near-term losses

  • The volume and momentum indicators sided with the bears

What you should know - FET has trended downward over the past two weeks, and the OBV highlighted that the selling volume has persistently outweighed the buyers. The RSI also remained below neutral 50 to indicate that downward momentum was stronger. The key swing low at $2.15 from 19th March was broken during the recent drop. Even though prices have bounced above it at press time, the short-term outlook is bearish. The $2.5 and $2.86 levels need to be broken for the bulls to have some chance of recovery. Meanwhile, the Fibonacci retracement levels outlined $1.5 and $1.06 as key HTF support levels.

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