Comparing Top Cap Network Health in the Final Stretch of 2023

Crypto markets have certainly gotten spicy in the last couple of weeks, with bulls and bears pushing and pulling to get top caps to behave the way they hope.

Mid-October to early December was one of the best times to be longing cryptocurrencies since market-wide all-time highs were hitting in the 2nd half of 2021. But now, we are at a crossroads.

The average trader is well in profit in 2023, and understandably so, considering that Bitcoin alone has grown its market cap +154% between January 1st and now. Altcoins like Chainlink, Cardano, Solana, and XRP Ledger have all had some impressive independent runs in the 2nd half of 2023.

Comparing a few key metrics to one another can help provide some clarity as to how the rest of this year and beyond should play out.

Trading volumes among top cap assets have slowed down, particularly in the last week. Yes, this is certainly a reflection of fear and uncertainty among the crowd. But it also may reflect that the FOMO'ers who pushed many of these coins up to year-high levels have come and gone.

Bitcoin's volume has surprisingly stayed up at the higher level it has been seeing since October, while the many altcoins represented by the smaller, declining hills in the below image, are the ones that have really fallen.

But it isn't just the social volume, of course. Sure, there are still several projects that are seeing plenty of attention here in mid-December, such as BONK, ORDI, and INJ. But note how the conversations related to Bitcoin (in green, below) peaked during the first week of December, and has been falling since.

Meanwhile, there was a bump in some of the larger cap assets in the 2nd week of December, particularly ADA and DOGE. This pattern of Bitcoin hype peaking one week, and then altcoins peaking the next, is actually quite normal. It indicates that BTC profits were being distributed to alts for one final hype cycle. And now the discussion rates have fallen.

This doesn't necessarily mean that price tops have necessarily happened. Market caps can still climb as FOMO and enthusiasm falls. In fact, in most cases, declining FOMO actually strengthens the probability of further rises.

However, under the circumstances where market-wide surges have happened for the past 2 months, there are plenty of things working against continued pumps as well.

For example, notice how the below image indicates that assets like BTC, LINK, and MATIC have seen increasing supply moving to exchanges here in December. More coins moving to exchanges is rarely a good thing for the argument of future rising prices. Historically, these movements are more indicative of selloffs that could be upcoming, or are in the process of happening.

You'll notice that Tether (in blue) and USD Coin (in orange) are also pictured on the below exchange supply comparison chart. The fact that they have shown some mild signs of moving to exchanges is a better sign, because this means more buying power is moving to exchanges even if happening in tandem with some crypto sell-offs. But ultimately, Bitcoin seeing its supply on exchanges increase by 3.5% is a bigger concern than stablecoin movement is encouraging.

Lastly, we should be continuing to monitor top cap mean dollar invested age as the year comes to a close and 2024 begins. In the below image, we can see that Bitcoin (in pink) actually has seen its line moving down since mid-October. This is a very positive sign, indicating many wallets that were previously dormant have now began moving large amounts of coins. The line hasn't been a consistent downswing.

But if BTC's market value continues fluctuating in this $40K-$43K range, and the mean dollar invested age line is still moving down now that its price has flattened out, it would be a signal that crypto's top asset may make a quick run at $50K in early 2024.

Other notable projects to watch include Ethereum (in red), which has seen its line flatten out and move slightly downward (though not as aggressively as Bitcoin). USD Coin (in orange) should also be monitored. The 2nd largest stablecoin by market cap is suspected to be one of the biggest beneficiaries of BUSD no longer being directly controlled by Binance, as Coinbase's native stablecoin has seen an increase in interest.

Overall, there have been signals primarily pointing to crypto seeing a bit of a cooldown period. While many new bulls have popped out of the woodwork in the final quarter of 2023, bears have more recently been the louder ones when slight market-wide price drops began to change the narrative in the 2nd week of December.

When there is major polarization between bulls and bears, like we are seeing now, then often times the most likely outcome is for crypto to go back into a (relatively) boring ranging period once again.

We will certainly keep you posted when more anomalies begin to appear and signal that there is likely to be another big shake-up one way or the other!

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Disclaimer: The opinions expressed in the post are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.