Market Wrap_ Altcoins Underperform als Bearish Sentiment steigt

Market Wrap_ Altcoins Underperform als Bearish Sentiment steigt

Analysts expect the price swings to be short-lived.

Bitcoin (BTC) fell back from a high of $30,658 during the New York trading session as buyers held off. The cryptocurrency is up 3% over the past week, but has struggled to outperform the majority of alternative cryptocurrencies (altcoins).

Internet Computer's ICP token forfeited Thursday's gains and fell 10% in the last 24 hours, while BTC remained unchanged in the same period. Avalanche's AVAX token and Solana's SOL token fell 4% on Friday, while Polkadot's DOT token rose 4%.

Sentiment among crypto traders remains negative, as evidenced by a drop in the Bitcoin Fear & Greed Index in recent days. The index moved deeper into the "extreme fear" range, similar to January this year, when an upswing in the BTC price preceded it.

Still, technical indicators point to a limited uptrend for Bitcoin, especially at its 50-day moving average, currently at $34,177.

In traditional markets, the S&P 500 and Nasdaq slipped on Friday, while the 10-year Treasury bond yield rose. Gold prices were also down on Friday and are down 5% over the past three months, compared to a 25% loss in BTC and a 4% decline in the S&P 500 over the same period.

Latest prices

●Bitcoin (BTC): $29.548, -2.35%

●Ether (ETH): $1,749, -3.87%

●S&P 500 daily close: 4.108, -1.64%

●Gold: $1,854 per troy ounce, -0.69%

●Ten-year Treasury yield daily close: 2.96%.

Short-term bounce?

Some analysts believe that crypto prices will stabilize in the short term, which is usually the case after periods of significant price declines.

"For BTC and ETH, the current price decline is identical to the 2020 price decline [COVID-19]. It is possible that we may see a near-term rebound from these oversold levels," QCP Capital, a Singapore-based crypto trading firm wrote in a report Friday. The S&P 500 and Nasdaq posted similar peak-to-trough declines, which could point to a short-term recovery in speculative assets.

Still, it took about a year for BTC and ETH to hit a bottom in 2017, meaning the uptrend could be limited until an absolute bottom in price occurs, QCP said.

Bitcoin dominance intact

So far, some crypto traders have reduced their risk. Typically, altcoins fall more than bitcoin in down markets due to their greater risk profile. As a result, Bitcoin's market capitalization increases relative to the total market capitalization of cryptocurrencies (dominance ratio) during bear markets.

The chart below shows a recent breakout in the BTC dominance ratio, similar to what happened in 2018. This means that a reversal of the risk-on environment of the past two years is underway. A rise in the dominance ratio towards 50% could provide some relief for altcoins compared to BTC, albeit in the context of a confirmed downward cycle for cryptocurrencies.

For now, upside is limited to short-term trading ranges.

Altcoin Review

  • Chainlink expands to Solana: The blockchain oracle network announced Friday that developers building decentralized finance (DeFi) applications on the Solana mainnet can now include seven Chainlink price feeds in their products. Popular decentralized finance (DeFi) projects such as Aave, Compound and dYdX already use Chainlink's data services.
  • WAVES' wild ride: WAVES, a token based on the public Waves blockchain that allows users to access Web 3 apps, saw a twofold increase in the past week. "We need to work on the algorithm," founder Sasha Ivanov said on CoinDesk TV's "First Mover" show earlier this week, after the dollar was devalued several times. WAVES is still down 84% from its all-time high in March.
  • Volume is stabilizing, "We have seen more balanced flows, although it seems that both buyers and sellers are hesitant to get too aggressive, in our opinion. BTC and ETH continue to dominate trading volume. Cardano's ADA saw larger volumes as its token rose as much as 36% in the days leading up to the end of the month," David Duong, head of institutional research at Coinbase, wrote in an email.

Relevant Insights

  • Japan passes landmark stablecoin law to protect investors: Report: new legal framework will take effect in a year.
  • Middle Eastern oil producers get into bitcoin mining with Crusoe Energy: The U.S. startup, which uses flared natural gas to power bitcoin mining facilities, counts the sovereign wealth funds of Abu Dhabi and Oman among its investors.
  • Riot Blockchain Sells More Bitcoin, Cuts Hashrate Guidance: It's the third straight month the miner has sold bitcoin.
  • Consumers have lost more than $1 billion to crypto fraud since January 2021, FTC says: "Cryptocurrencies are quickly becoming the preferred payment method for many fraudsters," the agency says.
  • Market flight prompts analysts to cut bitcoin miners' price targets by an average of 65%: however, BTIG's analyst remains positive on the longer-term outlook for miners and maintains his buy rating on the shares.
  • Crypto companies, especially Exchanges, are cutting jobs as the market rout continues: Many crypto companies are announcing significant job cuts and hiring freezes amid tough times for the cryptocurrency and equity markets.
  • Opinion: Are the layoffs on exchanges the first sign of crypto winter, or is it already over? Coinbase, Gemini and other crypto exchanges are laying off employees. It could get worse - but there's reason to hope for a soft landing, says CoinDesk's David Morris.
  • Opinion: Tackling the Quantum Threat to Bitcoin: It's time for the crypto community to face up to the challenge super-computing poses to its networks, says Michael Casey, CoinDesk's chief content officer.

Other markets

Most digital assets in the CoinDesk 20 list ended the day lower.

Biggest gains

Asset Ticker Returns DACS sector
Stellar XLM +1.6% Smart contracts platform

Biggest losers

Asset Ticker Earnings DACS Sector
Internet Computer ICP -10.2% Data Processing
Polkadot DOT -5.6% Platform for smart contracts
Solana SOL -5.5% Smart contracts platform

Sector classifications are provided through the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.