The crypto market shows 5 positive signals. Is a bull run coming?

Recently, the crypto market has shown an upward trend, with ETH performing remarkably after the Shanghai upgrade, rising over 75% this year. Multiple market indicators suggest that the encryption industry is entering a phase of positive development. Although there are still some negative voices, the overall trend of cryptocurrencies has improved since the FTX incident, even maintaining an upward trajectory during turmoil in the banking sector. This article will analyze the current development trend of the crypto market from five key indicators.

1. The scale of open interest hits a new high

Futures contracts are one of the main ways for traders to gain leveraged exposure to crypto assets. The open interest ( reflects the number of futures contracts that are not yet closed or hedged, including both long and short positions. High open interest usually indicates a higher market risk appetite and ample liquidity.

The total open interest in Bitcoin futures has surpassed the $9.9 billion high before the FTX collapse, recently breaking through $10 billion in trading. This indicates that the crypto derivatives market is gradually filling the gap left by FTX. The rebuilding of open positions and improvement in liquidity are positive signals for the market, but caution is warranted regarding the risks that may arise from accumulated leverage.

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2. On-chain activity has significantly rebounded

Despite the controversial macroeconomic outlook, the blockchain economy is showing signs of prosperity. The total number of daily active addresses on major smart contract platforms has stabilized around 2 million, marking the first time since the end of the 2022 bull run, and it has increased by 77% from the low point in August 2022.

The total yield of DeFi has continued to rise since June 2022, increasing by 94.2% from its lowest point. The rise in yield is usually associated with an increase in asset prices, reflecting that individuals and institutions have increased on-chain trading and leverage strategies. Higher yields also indicate that borrowers can bear higher capital costs, suggesting an overall improvement in capital conditions.

As inflation risks ease, cryptocurrencies are regaining vitality, and the attractiveness of DeFi yields has also increased.

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3. The Proportion of Stablecoins Decreases

Since the low point of the FTX crisis, the crypto market has seen a continuous increase in net exposure of funds, with no signs of slowing down. On-chain data shows that since the collapse of Terra-Luna in May 2022, large holders' exposure to stablecoins has dropped to a minimum, with an average of only 15% of their portfolios allocated to stablecoins.

Although the liquidity in large wallets has decreased, there is still a considerable amount of capital available before it drops to the 5% bull run low point. The USDC confidence crisis triggered by the banking crisis in March has also affected investors' willingness to hold stablecoins. The shift in market sentiment from dollar-pegged assets to token assets is a positive signal.

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4. Volatility Index Declines

The crypto volatility index ) developed by CVI Finance is similar to the traditional financial VIX index (, showing that even during turmoil in the banking sector, the index continues to decline and is currently even below the 62.80 low point before the FTX incident.

While the number of open contracts is rapidly increasing, the CVI index's expectation for future price volatility is weakening, which is a reassuring sign.

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5. Ethereum withdrawals are proceeding smoothly

Despite previous concerns that the Shapella upgrade would lead to large-scale withdrawals, the actual situation is quite optimistic. As of April 19, only 25.7k validators are waiting to withdraw their full amounts, with 46.5% coming from Kraken, which was forced to terminate its staking operations in the U.S. Due to the withdrawal limits set by the network, these withdrawals will be completed within two weeks.

Approximately 1 million ETH were partially withdrawn within 5 days after the Shapella deployment, but the market seems to have smoothly absorbed an additional supply of over 500,000. A considerable portion of the assets has not been sold but has been re-staked into the network.

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Market Outlook

Despite the uncertainty in the macro environment, the crypto market is showing positive signs. Major digital currencies have broken through the bear market trading range, and small-cap coins are also showing upward momentum. After the pessimistic sentiment at the beginning of 2023, investors are continuously increasing their positions, pushing up prices and putting cryptocurrencies on the edge of a bull run.

This round of increase is not only reflected in prices; cryptocurrencies have also found sustainable application scenarios, maintaining high user activity and pushing up DeFi yields. The volatility index of the crypto market has broken through the 2022 low, with trading volumes reaching a new high since the last bull run. The pessimistic expectations surrounding the Ethereum Shapella upgrade have also been broken. Various signs indicate that the crypto market is entering a phase of positive development.

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