Market Wrap_ Cryptos fall on choppy trading, DeFi underperforms

Market Wrap_ Cryptos fall on choppy trading, DeFi underperforms

The risk situation remains intact as volatility returns to equities and cryptocurrencies.

Bitcoin (BTC) moved in a choppy range last week while volatility increased. This could reflect uncertainty among crypto traders.

BTC is down 3% in the last 24 hours and was little changed last week. Meanwhile, several alternative cryptocurrencies (altcoins) underperformed on Friday. For example, Solana's SOL token fell 5% and Avalanche's AVAX token dropped 4% in the last 24 hours.

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On Friday, the S&P 500 briefly fell into bear market territory, dropping more than 20% from its record high in January. Volatility remains elevated in both equities and cryptocurrencies, while gold, a traditional safe haven, traded a tick higher on Friday.

On the macroeconomic front, some analysts expect selling pressure in equities to ease, which could benefit cryptocurrencies in the short term. The correlation between bitcoin and the S&P 500 has increased over the past year.

"It is premature to worry about an impending recession until the bond market and central banks tighten monetary conditions, which we do not expect to happen in 2022," MRB Partners wrote in an email Friday. The firm believes equity markets have a chance to recover as global growth conditions prove resilient, provided interest rate expectations and bond yields settle down soon.

Latest prices

●Bitcoin (BTC): $29.278, down -2.48%.

●Ether (ETH): $1,968, -1.58%

●S&P 500 daily close: $3,901, +0.01%

●Gold: $1,844 per troy ounce, +0.12%

●Ten-year Treasury yield daily close: 2.79%.

Bitcoin, ether, and gold prices are determined at approximately 4 p.m. New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information on the CoinDesk indices can be found at

DeFi underperforms

Decentralized financial tokens (DeFi) have underperformed Bitcoin over the past month. Typically, DeFi and other altcoins underperform in a down market due to their higher risk profile compared to Bitcoin.

The CoinDesk DeFi Index (DFX) is down 33% over the past month, while the CoinDesk Bitcoin Price Index (XBX) is down 23% over the same period.

However, DFX has stabilized over the past week. Recent gains in AAVE have helped, while a 17% drop in the CRV token has hurt the overall index's performance over the past week.

Altcoin Review

  • The Case of Terra: CoinDesk's Krisztian Sandor and Ekin Genç have put together a detailed timeline of Terra's journey from its outsider start as a payment app in South Korea to a $60 billion crypto ecosystem to one of the biggest failures in the crypto world. Read more here.
  • Luna Foundation Guard has no plans for AVAX: Avalanche, a smart-contract blockchain, said in a tweet that Luna Foundation Guard (LFG) - the entity behind the reserve fund set up to secure the now-failed Terra blockchain UST stablecoin - has "disclosed no plans" for the 2 million AVAX tokens now sitting in its treasury. With a fluctuating token price of about $30, the market value of AVAX's holdings is about $60 million, making it the second-largest holding in LFG's shrinking $240 million treasury. Read more here.
  • Terra's DeFi apps with losses: Data from trackers show the value of funds held in DeFi apps on Terra fell to $155 million Friday morning, a level last seen in February 2021, down from more than $29 billion earlier this month. Terra DeFi's locked-in value peaked at $30 billion in early April. The declines came as the UST lost its 1:1 peg to the U.S. dollar amid a general slump in markets. Read more here.

Relevant Insights

  • Listen 🎧: The CoinDesk Markets Daily podcast looks at Bitcoin's even steeper slump and explores what's behind the biggest stablecoin of all.
  • Coinbase co-founder Fred Ehrsam buys the dip, buys $75M of company stock: the purchases were made through Paradigm, a venture capital firm Ehrsam co-founded.
  • BIP 119: Unpacking CTV and how it would change Bitcoin: Right now, we can only use Bitcoin scripts to determine when or why a Bitcoin is spent. But what if we could use them to determine how a bitcoin is spent?
  • Crypto should meet the same standards as regular finance, says the G7: Citing recent market turmoil, finance ministers want financial stability and money laundering standards to come into force soon.
  • Goldman sees little impact on the U.S. economy from lower cryptocurrency prices: The decline in the stock market had a much bigger effect on the net worth of U.S. households, the bank said.
  • UK regulator will consider Terra Coins collapse in new crypto rules: Report: instability of stablecoin market must be taken into account, says FCA's executive director for markets.
  • CFTC charges 2 men with running $44M crypto Ponzi scheme: Sam Ikkurty and Ravishankar Avadhanam are accused of using YouTube videos to get potential customers to invest in various crypto funds.
  • Former BitMEX CEO Arthur Hayes faces 6 to 12 months in prison at Friday's hearing: Hayes pleaded guilty in February to a violation of the Bank Secrecy Act and faces up to 12 months in prison.

Other markets

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

Biggest Gains

Asset Ticker Returns DACS sector
Cosmos ATOM +6.1% Smart contracts platform
Algorand ALGO +0.5% Smart contracts platform
Bitcoin cash BCH +0.3% Currency

Biggest losers

Asset Ticker Earnings DACS Sector
Litecoin LTC -2.6% Currency
Solana SOL -2.5% Smart contracts platform
Bitcoin BTC -2.4% Currency

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.

UPDATE (May 18, 20:45 UTC): Adds information on US equity markets and their declines.