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Market-wide crypto sell-off follows historic Bitcoin mining difficulty drop

2021.07.05 Adam James

With the entire cryptocurrency market starting the week in decline, ETH is looking to take back more of what was lost against BTC. 

The cryptocurrency market is selling off on Monday after a strong Independence Day weekend in the United States saw global prices for BTC and ETH reach nearly 36,000 USDT and 2,400 USDT on OKEx. Now, the leading cryptocurrencies are down roughly 5.5% and 5%, respectively, per data from CoinGecko.

The sell-off is market-wide and is driving prices of various altcoins down by a similar amount as the market leaders. Major coins and tokens — such as DOGE, XRP, DOT and UNI — are down more than 5%, pulling the total cryptocurrency market capitalization down more than 4.5%. 

The cryptocurrency market is a sea of red today as the weekend’s positive price action is retraced. Source: Coin360

Bitcoin’s mining difficulty experiences historic decrease

As expected, the mining difficulty of the Bitcoin network has followed the massive drop in hash rate and has experienced the largest decrease in its entire history. As reported by multiple industry sources, Bitcoin’s mining difficulty has fallen by just under 28%. 

As a result, the speed at which blocks are produced — and, therefore, transactions are confirmed — should accelerate, after the network became relatively sluggish amid an exodus of Bitcoin miners from China.

The difficulty of the Bitcoin network has taken its largest hit in history. Source: CoinWarz

Increasing optimism likely to be dampered by price declines

Sentiment in the cryptocurrency market remains fearful. Per multifactorial crypto market sentiment analysis from alternative.me, the market is marginally more optimistic than last week — but the next update may see extreme fear return if prices do not bounce between now and then.

Negative factors weighing heavy on the wider market remain China’s crackdown on cryptocurrency mining and various regulatory actions being taken against global cryptocurrency exchanges — developments that are not entirely unexpected as governments and regulators look to maintain control over the world of finance.

The cryptocurrency market is back to being extremely fearful. Source: alternative.me

Curve regains DeFi dominance, Aave plans institutional product

Curve has taken over the top spot by total value locked in the decentralized finance market. The decentralized exchange liquidity pool for stablecoin trading has surpassed decentralized lending platform Aave and now has a market dominance of 8.86%, per data from Defi Llama. 

Meanwhile, derivatives liquidity protocol Synthetix has seen one of the largest daily TVL increases today after adding nearly 13%. The total value locked in the DeFi platform is currently $1.42 billion.

In DeFi-related news, Wyoming has approved the United State’s first legally recognized decentralized autonomous organization after the crypto-friendly state recognized the American CryptoFed DAO. The news makes America’s least-populous state even more of a leader in the cryptocurrency world, with the American CryptoFed DAO CEO Marian Orr stating:

“Wyoming is the leading digital assets jurisdiction in the USA, and now with this DAO law, Wyoming is arguably the top blockchain jurisdiction in the world. What this means is that creating a true digital currency with mass acceptance is now possible.”

Meanwhile, now-second-ranked Aave plans on launching, together with Fireblocks, an institutional-focused permissioned version of its platform later this month. The product will apparently be called Aave Pro and add a white-listing layer onto its second-version smart contracts that ensures only registered institutional investors and similar have access.

The total value locked in Synthetix is currently looking to challenge $1.6 billion. Source: Defi Llama

Top altcoin gainers and losers: Small-cap altcoins dominate

  • KCASH/USDT +30.11%
  • MLN/USDT +28.54%
  • EGT/USDK +24.52%
  • LET/USDT -12.41%
  • EC/USDT -12.48%
  • ROAD/USDT -13.36%

As expected in a market-wide downturn, the top-performing altcoins on OKEx today carry small market capitalizations. The top performer, KCASH, only has a market cap of $6.25 million, and third-place EGT has less than $6 million.

The top-performing major altcoin listed on OKEx is LEO, which has gained more than 5%.

The price of LEO has seen the largest increase among major altcoins on OKEx today. Source: OKEx

BTC technical analysis: Horizontal range lacks inspiration

The price action of BTC, in the medium term, has been nothing short of uninspiring. It is currently trading in the lower half of a wide range between sellers around 40,000 USDT and buyers around 30,000 USDT. 

Until this horizontal range sees a breakout in either direction, the strategy for many traders remains short-term scalping and/or buying the bottom of the range with the intent to sell the top of it.

OKEx’s BTC/USDT 4h chart — 7/5. Source: OKEx, TradingView

ETH technical analysis: Regaining lost ground against BTC

The price of ETH has regained significant market share from BTC and is currently challenging a major level of potential resistance at 0.067 BTC. With the four-hour ribbon of exponential moving averages sitting underneath, buy support may succeed at pushing the value of ETH higher against the leading cryptocurrency.

Alternatively, a breakdown here could see ETHBTC fall back down to the bottom of its horizontal range — near 0.057 BTC.

OKEx’s ETH/BTC 4h chart — 7/5. Source: OKEx, TradingView

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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.



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