An analysis from Goldman Sachs highlighted a volatile week in the cryptocurrency market, focusing particularly on (BTC) and (ETH). The report notes a 10.4% drop in total market capitalization, equivalent to a loss of $280 billion.
The slowdown began on a Sunday, when BTC and ETH experienced three days of declines before recovering during the US trading session and strengthening further in Asia.
A key observation from Goldman Sachs is the healthy pullback in the cryptocurrency market. This was expected in part due to the rapid rise to all-time highs in mid-March and elevated perpetual futures funding rates, which have since normalized.
Bitcoin and Ethereum's open interest (OI)-weighted funding rates declined from early March peaks to more sustainable levels, indicating a cooling of previously overheated market conditions.
“Coming closer, the sudden pullback and subsequent recovery was not a surprise, especially considering the speed at which we reached the mid-March ATH and the elevated perpetual futures funding rates that accompanied it, as investors looked to place positions leveraged longs on retail cryptocurrency exchanges,” the report reads.
“Since then, funding rates have settled at healthier levels. BTC's OI-weighted funding rate peaked on March 5 at ~107% annualized and has since retreated to ~15% annualized. “The ETH OI weighted funding rate peaked on March 5 at ~104% annualized and has similarly fallen back to the current ~19% annualized,” he further details.
Investment activities also reflected market sentiment, with Bitcoin ETFs experiencing net outflows for three consecutive days, particularly due to continued outflows in Grayscale Bitcoin Trust (BTC) (NYSE:). However, aside from GBTC, other BTC ETF holdings remained relatively stable, with modest inflows despite the market decline.
An analysis of BTC holders indicated early signs of profit-taking, as suggested by on-chain activity. There has been a slight decrease in the percentage of BTC supply held for at least a year, indicating increased market activity among medium- and long-term holders.
Additionally, there has been an increase in transactional activity, especially within the 7-30 day range, suggesting a higher frequency of BTC changing hands on a monthly basis.
Ethereum's performance relative to Bitcoin was also highlighted in the research note, with the ratio falling. The future of ETH spot ETFs remains uncertain, and regulatory decisions on the Fidelity and Grayscale proposals are being delayed.
The report mentions a confidential investigation received by the Ethereum Foundation from an unspecified state authority, adding to the regulatory uncertainties surrounding the world's second-largest cryptocurrency.
