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An Opportunity in Disguise?
Yesterday, the cryptoasset market was down by 17%, and Ethereum has had its worst trading day since 2021. Following the turbulent hours of the first trading day of the week, our research team broke down some of the primary factors driving markets; you can have a look here.
This morning, we saw some signs of recovery after yesterday’s sharp market drop. Here’s what happened where we left off on Monday:
• Japan stocks rallied more than 9% on Tuesday: NIKKEI 225 (+10.23%), TOPIX (+9.30%).
• Crypto and equities: Matching the sentiment, the total crypto market cap increased by 8.8%. Wall Street’s fear gauge VIX has cooled down to 38.57 from yesterday’s soaring 65.
• U.S. economic activity expands: Purchasing managers reported a 51.4% expansion (up from 48.8%) in the services sector last month, which spurred some optimism for a soft landing.
• Futures advance: Nasdaq 100 (+1.5%), STOXX 600 (+0.6%), showing initial signs of recovery after yesterday’s market turbulence.
For more information, read our full market update here.
How did BTC and ETH perform in previous bear markets?
Bitcoin is currently in the Extreme Fear zone, which shows that the asset is undervalued and may be an important investment opportunity . The last time Bitcoin was in this territory, it was trading around $16K following the FTX crash, followed by a historical price rally, reaching multiple all-time highs.
Figure 1 – Bitcoin Fear & Greed Index
Source: Glassnode
The two examples below, a macro-specific and crypto-specific event, led to the largest daily drawdowns of Bitcoin and Ethereum. These can be used to understand how their prices may move after yesterday’s events.
Figure 2 – Bitcoin 3 Biggest Daily Drawdowns Since 2020
Source: 21Shares
Figure 3 – Ethereum 3 Biggest Daily Drawdowns Since 2020
Source: 21Shares
Potential Scenarios for BTC / ETH
Below, we outline the macro-specific events that potentially affect Bitcoin and Ethereum’s recovery in the near future.
- Short-term potential price movement
Important to note that past performance is not indicative of future results but can still serve as a useful reference point.
This Week’s Calendar
Source: Forex Factory, 21Shares
Research Newsletter
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
The third week of December was rough for crypto prices. The Nasdaq Crypto Index™ (NCI™) fell 9.7%, led by lackluster performance from Bitcoin (-3.2%) Ethereum (-2.3%) and Solana (-6.4%). This negative performance comes after weeks of strong price action in the crypto market, fueled by a series of positive developments. On Wednesday, the Fed lowered rates once again but Chair Powell suggested these cuts may slow.
Bitcoin ETFs experience strong selling spree after positive streak of days
US spot Bitcoin ETFs experienced a record $680 million in net outflows on Thursday, ending a 15-day streak of positive flows totaling $6.7 billion. This could indicate potential profit-taking by investors, given Bitcoin’s impressive 119% appreciation since the start of the year. If we are indeed at the beginning of a bull market, corrections during this cycle are expected to be nominally larger, as BTC, currently valued at around $100,000, has the potential for further appreciation throughout this cycle.
Ether ETFs record inflows in December
ETH ETFs attracted $1.66 billion in new investments this December, accounting for 74% of their $2.24 billion total inflows since inception and reflecting growing institutional interest beyond Bitcoin. The strong inflow-to-market cap ratio signals rising confidence in Ethereum, potentially paving the way for a broader range of regulated crypto products to gain prominence.
From Hashdex: With the year’s end approaching, we would like to invite our readers to explore our Outlook 2025, as it offers key insights to help investors confidently navigate the crypto market in this upcoming year.
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