Bitcoin dominance continues to climb amid volatility

  • Price trend. Bitcoin is now at a deep discount to the Russian ruble.
  • Trading volume. Bitcoin’s trading volume has been climbing over the past month as traders rotate out of altcoins.
  • Liquidity of orders. The BTC-RUB and BTC-UAH spreads remain volatile, in line with the global foreign exchange market.
  • Derivatives. The put-call ratio for BTC and ETH options has stabilized.
  • macro trends. Commodity prices are surging as U.S. inflation hits a 40-year high.

Price trend

Volatility in global financial markets persists.


Investors continued to de-risk their portfolios, with Bitcoin and Ethereum both closing in the red this week, while the tech-focused Nasdaq 100 entered its first bear market since the pandemic (down from its recent peak) 20%). Commodity markets remain in full price discovery mode, exhibiting strong volatility as traders struggle to price in the fallout from the current geopolitical crisis. Despite growing concerns about stagflation (defined as a period of slowing growth and high inflation), most major central banks have continued to pursue hawkish monetary policy. Markets have upped their bets on a rate hike by the Federal Reserve this week as U.S. inflation hit another multi-decade high in February.

In crypto industry news, President Biden issued a long-awaited executive order on crypto assets, FTX is expanding into Europe, and Binance is launching its own fiat-to-crypto payment processing company.

DeFi tokens suffer after developers leave.


DeFi tokens continued their downward trend last week after developer Andre Cronje announced his permanent exit from the industry. Cronje has contributed to around 25 projects in this space, including Yearn Finance, Fantom, Keep3r, and Solidly. Yearn Finance’s YFI took a big hit on the news, plummeting 7% between March 5 and 7. Fantom — a high-throughput blockchain network comparable to Ethereum — has seen its total value locked plummet +20%.

Overall, most DeFi tokens underperformed Ethereum in March, with the notable exception of SNX, the native token of the Synthetix protocol. SNX, one of the worst-performing DeFi tokens in 2021, saw a strong rally last week amid several upcoming network upgrades and increased mark-to-market demand. Despite the surge, the token is still more than 80% below its all-time high. The recent drop in Ethereum gas fees and the total value locked in Ethereum-based DeFi protocols indicates subdued investor interest in the industry.

Bitcoin trades at a steep discount to the Russian ruble.


Bitcoin continues to trade at a premium in the Ukrainian hryvnia (UAH) market, while at a steep discount in the Russian ruble (RUB) market. The premium (or discount) for buying bitcoin with fiat currency is calculated by calculating the difference between the price of BTC traded in the local market (converted to USD using the fiat exchange rate) and the price of bitcoin in the USD market. The huge discounts observed in the Russian market may be due to strong selling pressure from Russians seeking to liquidate their crypto assets at the risk of sanctions. So far, centralized crypto-asset trading services have complied with official sanctions against Russia, halting payments from sanctioned Russian banks and limiting accounts.

Notably, despite the massive discount, Bitcoin is trading at an all-time high relative to the ruble, highlighting the extent of market inefficiency. This suggests that the discount may also be due to severe disruptions to the price discovery process, as well as uncertainty about the value of the ruble relative to other currencies amid low liquidity, foreign currency restrictions and delayed market adjustments. Also interestingly, the discount reflects the oil market, with traders shunning Russia’s flagship Urals crude, resulting in a 24% discount to Brent in early March.

Trading volume

Ruble and Sylvinia trading activity diverged.


The most straightforward way to understand trader sentiment is to look at the buy-to-sell ratio, which is calculated using Kaiko’s tick-level trading data. While exploring this indicator for the Ukrainian hryvnia and Russian ruble-denominated bitcoin markets, we noticed several interesting trends. Buying in Binance’s BTC-UAH market surged to 79% following the entry event, indicating that traders are indeed flocking to the crypto asset amid the massive financial uncertainty. The trend in the Russian market was much flatter, with buying only briefly outpacing selling.

For the ruble-denominated market, we can observe a slight increase in selling volumes since the sanctions were imposed, even though the ruble has experienced a 60% loss in value. Crypto-asset trading service platforms must comply with sanctions, but there is no blanket ban on crypto-asset trading in Russia. Instead, the bans affected the underlying payment systems that allow Russians to trade crypto assets, including SWIFT, Visa, and Mastercard. On March 9, Binance announced that Visa and Mastercard credit cards issued in Russia would no longer be able to be traded on Binance. After this date, we can observe a sharp drop in ruble-denominated volume, which reached an all-time high on March 7.


Trading volumes are now at pre-entry levels. This is not the case for crypto-asset trading volume in dinars, which remains at elevated levels. This suggests that the sanctions have affected Binance’s trading activities. However, as the Binance CEO pointed out, there are many ways to access crypto assets outside of global trading service platforms, including OTC counters, regional platforms, and interacting directly with technology (rather than through third parties).

Bitcoin’s dominance grows during a market downtrend.


A popular indicator to understand market structure is to look at the dominance of Bitcoin versus Ethereum. The idea is that in a bull market, Ethereum’s market share increases relative to Bitcoin as traders invest in altcoins and alternative networks. In times of uncertainty, traders rotate funds back into bitcoin, considered a “safe haven” for the crypto asset. Since 2020, Ethereum’s trading volume has soared relative to Bitcoin in the biggest bull run in the history of the crypto asset. However, over the past month, the percentage of Bitcoin’s total transaction volume has surged to 66%, the highest level in nearly a year.

This trend suggests that Bitcoin is more resilient than Ethereum to geopolitical tensions and global risk aversion. BTC is down 20% since the start of the year, while Ethereum has lost 32% of its value. Overall, Ethereum’s market share remains well above its 2020 average, indicating that the market structure has changed over the past two years.

The number of privacy tokens has exploded.


Last week, privacy tokens — cryptoassets with features that increase anonymity — posted double-digit returns and surged in trading volumes as traders expected demand to rise following increased U.S. regulation of cryptoassets. The top three privacy tokens by market cap — Monero (XMR), Zcash (ZEC), and Oasis Network’s ROSE token — saw volume on Binance jump threefold to $245 million, the most since January highest level. Trading volumes surged after the U.S. president signed a long-awaited executive order requiring U.S. institutions to assess the benefits and risks of digital assets. Since Russia entered Ukraine, ZEC and XRM are up 51% and 42%, respectively. However, these tokens are still unlikely to be used to evade sanctions, and the surge is likely fueled by speculation.


February proved to be one of the most volatile months for global financial markets in recent memory, with stocks entering correction territory and crypto assets plunging before an almost miraculous rally. In our February report, we covered the market’s reaction to Russia’s entry and the broader implications of the geopolitical crisis.

Liquidity of orders

The spread between the ruble and the UAH remains volatile.


The spread of the BTC-RUB and BTC-UAH pairs on Binance has increased significantly after Russia entered Ukraine. The bid-ask spread represents transaction costs and is the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept. Typically, a widening spread is a sign of deteriorating liquidity in a trading pair. We observed that the spread for the BTC-RUB and BTC-UAH pairs surged more than 5x during the 27-28 February period.

The BTC-UAH spread soared to over 100 basis points and the BTC-RUB spread exceeded 40. For context, the BTC-USDT spread is less than 1 basis point. The trend mirrors traditional currency markets, where ruble spreads have widened considerably as markets price in illiquidity and sanctions.


The put-call ratio has stabilized.


The bearish-call ratio for Bitcoin and Ethereum has stabilized over the past few weeks after roughly two months of steady gains. Typically, an increase in the put-to-call ratio indicates that put demand is strengthening relative to demand for calls (a bearish bet) and is seen as a bearish sign. Ethereum’s put-call ratio rose faster than Bitcoin’s, rising from 0.66 in late January to 0.98 in February, before falling back slightly in early March. Ethereum’s bearish-bullish tilt, a measure of the cost of bearishness relative to bullishness, has also increased.

Overall, the put-to-call ratio remains significantly higher than in previous months, suggesting that traders are more cautious amid geopolitical and macro headwinds. We do not expect a strong improvement in market sentiment until the Fed starts tightening and the Russia-Ukraine peace talks progress.

macro trends

The dollar is stronger and the demand for cash is increasing.


Global demand for U.S. dollar liquidity remains strong after little progress in the recent Russia-Ukraine peace talks. The U.S. dollar index (DXY) – which measures the green coin’s performance relative to a basket of foreign currencies – strengthened for the third straight week. Popular U.S. inflation data for February also supported the dollar, confirming expectations that the Federal Reserve will raise interest rates at its meeting this week, despite growing concerns about the outlook for global growth. Above, we put the prices of DXY and Bitcoin together, and we can observe that they follow different trends since the beginning of the year, with BTC trading in a tight range while DXY is surging.

The rise in commodities boosted inflation expectations.


U.S. inflation expectations last week hit their highest level since 2003, driven by a surge in commodity prices. The chart above is a comparison of 10-year U.S. inflation expectations with the iShares S&P GSCI Commodity-Index Trust (GSG). GSG tracks a broad range of commodity futures, including energy, precious metals and agricultural markets. We have observed that commodities have risen sharply following the start of the war between Russia and Ukraine, the two major commodity exporters, as concerns over supply disruptions intensified, coupled with low global inventories. Margin calls have also added to volatility in commodity markets as traders struggle to price in the fallout from the conflict. Last week, the London Metal Exchange (LME) halted trading in nickel as the price of the industrial metal jumped 250% in two days, following a massive short squeeze.

Posted by:CoinYuppie,Reprinted with attribution to:
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