The Weekly Recap: The Elon Effect

Key Takeaways:

  • February kicked off with massive gains across the board, with BTC and ETH posting new all-time highs
  • The world’s wealthiest man extends his “mighty” reach into the crypto space

Bitcoin 

The price of BTC reached a new all-time high near $48,300 after Tesla announced, through SEC filing, a $1.5 billion investment in Bitcoin. Tesla’s venture into the crypto space has boosted the bull momentum to overcome the resistance at $42,000. With a surge of more than $7,500, this Tesla-fueled rally marked the largest daily Bitcoin candle in history.  

Chart, line chart

Description automatically generated
Source: Bybit

As of the time of writing, this bull momentum has subsided; Bitcoin’s market dominance experienced, in tandem, a drop to 61.75% from its local peak of around 64% on Feb. 7. The market dominance breakdown of major cryptocurrencies is listed below.

BTCETHBCHLTCXRPLINK 
Market Share61.75%14.65%0.69%0.88%1.72%0.81%
Weekly Change-0.47%-0.27%-0.05%+0.02%+0.10%-0.10%

Ether 

Riding shotgun to BTC’s Tesla-inspired bull run was ETH, pushing to fresh all-time highs as well, surpassing $1,840. Of course, Ether’s retests against resistance levels have also been fuelled by CME’s listing of the ETH futures contracts. You may remember CME’s launch of BTC futures back in 2018, which marked BTC’s top back that year. However, with stronger fundamentals, the current launch may prove to be just the catalyst the market needs. 

Chart, line chart, histogram

Description automatically generated
Source: Bybit

Altcoins 

Mid-cap altcoins’ strong performances have been stealing BTC’s thunder with their collective 51% gain posted so far this month. 

Weekly Performance of the Cryptocurrency Market
Source: The TIE Blog

At the forefront of this mid-cap bull run is Dogecoin, which has been raised from obscurity, first by the TikTok community and later by none other than Elon Musk himself, whose series of tweets and memes sent its price soaring through the woof roof. 

Chart, histogram

Description automatically generated
Source: TradingView

DeFi

The DeFi summer continues despite the blazing cold, with the total value locked surpassing $38.47 billion. In fact, almost every data point in DeFi has surged to records — DEX volume, total volume… You name it. 

Source: DeFi Pulse

On-Chain Activities 

The fundamentals are strengthening. Bitcoin’s liquid supply, for one, is on a continuous downward trend as investors, retail, and institutions alike have been acquiring and HODLing the asset for the long run. With Tesla’s high-profile endorsement of Bitcoin, the list of prospect market entrants is likely to grow. On the cards? Big-ticket firms such as Twitter and Mastercard. The faster procurement of free-floating coins in the network is, no doubt, a strong and sustainable bullish sign. 

Source: Glassnode

The number of addresses holding institution-sized amounts (between 1k to 10k BTC) has increased significantly since the last quarter of 2020. This category holds 30% of the total BTC supply. Meanwhile, retail investors are accumulating along with institutions. 

Chart, histogram

Description automatically generated
Source: Coin Metrics

This is also evident in the relative search interest for popular crypto terms reaching an all-time high on Google Trends. These search terms point to growing interests from amateur market entrants, who are looking for the optimal way to enter the ecosystem. 

Google Trends
Source: The TIE Blog

Consequently, the Fear and Greed Index shot up to 95 on Feb. 9 and has remained in the Extreme Greed region, indicating the return of euphoria in the market. 

Source: Alternative.me

Futures

The Elon Effect has left the derivatives markets on the boil, sending the funding rates soaring. The previous spike was seen during the sell-off on Jan 4.

Chart

Description automatically generated
Source: Skew

Extreme spikes in funding rate reveal that the market is disproportionately skewed to the longs, and could be in need of a short-term correction.