Trading volumes flow to top 3 assets as Solana (SOL) heads above $190

Trading volumes returned to the crypto market, showing inflows into top assets. The top 3 coins made up the bulk of inflows, especially as Solana (SOL) moved above $190. 

The most dominant coins and tokens continue to establish their position, as funds flowed into Bitcoin (BTC), Ethereum (ETH) and Solana (SOL). The inflows happened after SOL went ahead of Binance Smart Coin (BNB) and traded above $190. 

While BTC increased its dominance to 55.5%, ETH and SOL also gained their share of inflows and a more bullish expectation. According to Santiment, the inflow of funds into those base L1 tokens may signal further growth in all their related assets. Especially in the case of ETH and SOL, the inflows may feed into the DeFi ecosystem and into L2 and other tokens. 

???? Trading volume has veered heavily toward Bitcoin, Ethereum, & Solana as crypto's topsy turvy week ends on a good note. It's common for market-wide growth to be powered by these layer 1's, then redistributed to layer 2's & more. This may be a likely outcome for this weekend. pic.twitter.com/KjW9dsyPRD

— Santiment (@santimentfeed) July 27, 2024

In the past weeks, the dominance of the collection of small tokens fell toward 17%, as more funds entered blue-chip assets. Currently, Solana’s dominance is also ahead of Binance Smart Chain and BNB, which takes up 3.51% of the total market capitalization. 

In 2024, the expected altcoin rally has not yet arrived, and accumulation of top assets is seen as a factor for funds to flow back into other tokens. 

In a newly optimistic week, SOL rallied to $192.47, briefly going above $194. BTC spent most of the day above $69,000, also breaking above $70,000 for the first time after July’s correction. ETH recovered above the $3,300 tier, while awaiting more positive effects from the recently launched ETF.

The 2024 market is well-supplied with stablecoins

One source of inflows and liquidity in 2024 is the optimal supply of stablecoins. The total supply is above $165B, of which $152B are in fiat-backed stablecoins. 

The level of available liquid assets is comparable to the peak of the bull market in early 2022. But this time, the supply of assets is happening during more favorable conditions, as the market left some of its biggest problems behind. 

USDC is among the fastest-growing stablecoins, used for its more reliable asset-backed model. Recently, USDC increased its supply to Celo and became the best-used stablecoin on Base. USDT also stabilized its supply and established its dominance, mostly on the Ethereum and TRON ecosystems.   

Futures markets return to volatility

The recent market rally also kept the volatility on Bitcoin options relatively high. Additionally, the market enthusiasm saw a slowdown of spot buying, but a record open interest on derivatives. 

Bitcoin futures reached peak open interest after the latest inflow of funds. Nearly $80B in open interest is behind a mixed bag of long and short bets. Within the last day, the market added $1.5B in new open interest, suggesting potential volatility. 

Since June 24, the BTC volatility index also grew, from a low of 1% to 2.23%. The current growth of derivative trading with slow spot trading is raising questions on whether the current market is sustainable. 

The recent growth in open interest added some short positions, but also a dominance of long positions that could be attacked. In this case, attempts at liquidation would break the current rally. On the other hand, liquidating short positions may draw BTC higher. 

One of the most probable ranges to liquidate shorts would take BTC again above $72,000, based on the liquidation heatmap. The potential for leveraged trading is raising doubts on whether the rally will take BTC to a new high, or lead to a rapid crash on liquidations.

ETH open interest is considered healthier, but the coming weeks may put derivative trading as the leader. Spot selling has been noted, putting doubts on the stability of the BTC rally.

The SOL rally also seems driven by derivatives, as open interest reached a three-month high. For now, ETH remains stagnant as derivatives trading open interest is more modest, awaiting direction from ETF activity. ETH also enjoys a surge in social media volumes in the past week, as well as a movement of coins on the spot market. Additionally, funds are moving as Ethereum-based USDT increased its activity by 126% in a week. 

Cryptopolitan reporting by Hristina Vasileva