- Bitcoin and Ethereum have recorded a decline in volatility over the past few days
- Bearish sentiment continues to prevail in the overall market
After noting significant price fluctuations over the past few weeks, both Bitcoin [BTC] and Ethereum [ETH] Prices remained stagnant.
The calm before the storm?
In fact, Bitcoin trading has calmed down significantly this week, with volatility decreasing as trading volumes compressed from 70% to 50%.
When the market is consolidating, many traders prefer to accumulate long positions. However, despite this trend, most traders have decided to be bearish when it comes to BTC and ETH.
One reason for the same is that the market seems to be expecting further delays in the approval of the Spot Ethereum ETF by the US Securities and Exchange Commission (SEC). This is reflected in the deepening negative bias of ETH risk reversal, currently at -13% on the previous month contract. Negative skew means that a put option is more expensive than a call option for the same strike price and maturity.
In this context, the -13% negative skew in the front-month contract suggests a stronger preference for puts. This suggests that investors are more concerned about a potential price decline than they are excited about a near-term price increase.
Source: QCP
In the case of Bitcoin, the percentage of short positions against BTC rose from 49% to 54% in the past 24 hours.
Source: Coin Glass
But there are some bright spots next week. The launch of a Hong Kong-based spot ETF for both BTC and ETH could be an entry point for institutional capital inflows from Asia.
This could help turn the tide in favor of both BTC and ETH, potentially reducing the bearish sentiment surrounding both of these cryptocurrencies.
A story of two coins
Over the past few weeks, there has been a strong correlation between the price movements of BTC and ETH. Both coins have seen some corrections over the past few days, further increasing the bearish sentiment surrounding these cryptocurrencies. Moreover, the transaction speed of both these cryptocurrencies has also decreased recently.
Simply put, the trading frequency of BTC and ETH has decreased on the charts.
Source: Santiment
Finally, the MVRV ratios for both BTC and ETH increased, indicating that most addresses holding these coins were relatively profitable.
Furthermore, the difference between long and short these coins has also skyrocketed, indicating that the number of long-term BTC holders is increasing.
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Source: Santiment
