Is an end to the sideways market in sight?

The stock market has tightened its grip on cryptocurrency again, with the two markets trading in tandem over the past week.

Bitcoin has fallen 1% over the last seven days after an attempted recovery was capped at $9,600. Meanwhile, the S&P 500 is flat after efforts to restart the U.S. economy were thwarted by an acceleration of new coronavirus cases.

As several analysts have pointed out, the correlation between equities and cryptocurrency appears to strengthen during times of uncertainty. This is shown by the CBOE Volatility Index (VIX), also known as the “Fear Gauge”, which has ticked up this week as bitcoin traveled alongside stocks.

This Week’s Highlights

  • Ethereum Stalls as DeFi Surges
  • Chainalysis Confirms Institutional Presence

Ethereum Stalls as DeFi Surges

DeFi is the word of the week. This segment of the cryptocurrency market is heating up with a sudden surge taking the amount of Ether locked in DeFi smart contracts to over $1.5 billion, according to DeFi Pulse.

This activity is reflected in the number of transactions on the Ethereum network, which has pushed up to a level not seen since the price spiked to $360 in June 2019.

At present, however, the price of Ethereum hasn’t responded to the rising activity. The second-largest cryptocurrency climbed 1.5% over the past week to trade at $235, but is still capped by poor market sentiment and bitcoin’s sideways crawl.

Chainalysis Confirms Institutional Presence

Blockchain detective firm Chainalysis has turned its attention to analyzing the bitcoin market, finding that professionals are now responsible for “85% of all the USD value of Bitcoin sent to exchanges.” 

These large traders account for only 4% of the number of transfers, but “are the most significant contributors to large market movements,” according to Chainalysis. This data confirms the 

growing presence of big traders, as highlighted by Fidelity in a recent report.

The Week Ahead

Bitcoin’s ongoing correlation with stocks makes it vulnerable to broader market turmoil. This could come to a head on Wednesday with the release of the June World Economic Outlook from the IMF, which is widely expected to be negative.

Friday is set to be a big day in the cryptocurrency derivatives market, with a number of options contracts set to expire alongside quarterly futures. As expiry dates typically boost volatility, and bitcoin has now been stuck in a range between $8,800 and $10,400 for almost two months, traders are likely to be hoping for a sudden move to bring an end to the sideways market.