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.