Market Wrap: Bitcoin Close to $30K as Investors Search for a Bottom
BTC is down by 34% so far this year and is approaching the middle or late stage of a bear market, according to some indicators.
Bitcoin (BTC) dropped toward $29,200 before a sharp turnaround that saw the price get close to $30,000 later in the New York trading day. The cryptocurrency has traded in a choppy price range, and so far upside has been capped as some buyers remain on the sidelines.
Sentiment among crypto traders remains bearish, although some analysts and fund managers are starting to search for a price trough in the hopes of recovering from big losses realized over the past month.
"For each cycle we go through in digital assets, the time to accumulate is during the bear markets, and those gains are rewarded exponentially when the bull cycle resumes," Two Prime, a digital asset investment firm, wrote in an email. The firm expects its portfolio to recover from a slump if BTC returns above $33,000 and ether (ETH) returns above $2,200, roughly 10% and 20% above current price levels, respectively.
Two Prime's Digital Asset Fund, which also uses derivatives for income and hedging purposes, is expected to post a return of negative 31.4% for May, which largely followed the underperformance of ETH and other altcoins such as SOL. Typically, altcoins decline more than BTC during down markets because of their greater risk profile.
●Bitcoin (BTC): $31,163, −0.62%
●Ether (ETH): $1,853, −0.40%
●S&P 500 daily close: 4,161, +0.97%
●Gold: $1,856 per troy ounce, +0.89%
●Ten-year Treasury yield daily close: 2.97%
Bitcoin, ether and gold prices are taken at approximately 4pm 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 about CoinDesk Indices can be found at coindesk.com/indices.
Identifying a cycle bottom
Most indicators suggest bitcoin is approaching the middle or end of a bear market. For example, the realized price model, which is an estimate of the average cost basis of all BTC in supply, is $23,600. Some analysts view that as a key support level, which could indicate a price low.
"Historically, the overall market cost basis or realized price has been a very sound cycle support level, with 84.9% of bitcoin trading days closing above this level. In other words, only 15.1% of trading days have closed below the realized price," Glassnode, a crypto data firm, wrote in a blog post.
To confirm a low, BTC would need to return above the realized price level, similar to what occurred at the end of previous bear markets. That suggests market participants haven't fully capitulated yet.
"The bitcoin bear market is not over yet, although it has made a significant part of its way down. The market is full of rumors that short-term buyers have already capitulated," Alex Kuptsikevich, an analyst at FxPro, wrote in an email to CoinDesk.
Rather, a bull market begins when medium-term investors and even some long-term investors capitulate, which could attract buyers at lower prices, according to Kuptsikevich. BTC is "unlikely to reach this point before the price returns to the highs of 2017 (around $19,800)," he wrote.
- Morgan Stanley sees crypto tightening: Weakness in crypto markets, the failure of the UST stablecoin and a reduction in leverage in decentralized finance (DeFi) are resulting in the “crypto equivalent of quantitative tightening,” Morgan Stanley (MS) said in a report. However, “systemic spillover” risks from the crypto markets to the fiat banking system appear to be limited, the bank said, because the leveraged crypto companies usually borrow from each other. Read more here.
- Circle supports Polygon USDC: Circle, the issuer of the second-largest stablecoin USDC, is adding support for Polygon USDC on its payments and treasury platform. The move marks the first time a bridged version of the stablecoin has been supported on the platform, and will help developers building on Circle automate flows from fiat into Polygon USDC and allow them to swap fiat for native USDC across different blockchain networks. USDC has about $54 billion in circulation, gaining more than $5 billion in market capitalization in the stablecoin shake-up after UST’s collapse. Read more here.
- Binance.US’s staking push: The American arm of the world’s largest cryptocurrency exchange, Binance launched a blockchain staking product promising high yields on staked crypto, with the aim of outflanking similar offerings from rival U.S.-based exchanges. Staking – a popular DeFi service where users lock in assets to support proof-of-stake (PoS) networks – enables users to earn up to an 18% annual yield on certain tokens. The first tokens available for staking are audius (AUDIO), avalanche (AVAX), BNB chain, cosmos (ATOM), livepeer (LPT), solana (SOL) and the graph (GRT). Read more here.
- Listen 🎧: The CoinDesk Markets Daily podcast discusses what a bear market may mean for crypto jobs.
- Key US Senators Introduce Crypto Bill Outlining Sweeping Plan for Future Rules: Kirsten Gillibrand and Cynthia Lummis release a long-awaited strategy that favors the CFTC as a watchdog and wipes away tax worries for purchases of less than $200.
- Metaverse-Related Economy Could be as Much as $13 Trillion: Citi: The bank’s analysts identified early investment opportunities that could benefit from the growth of the digital world.
- PayPal Ups Crypto Push: Users Can Now Move Coins to Other Wallets and Exchange: PayPal crypto chief Jose Fernandez da Ponte said plans to let users move their crypto holdings to third-party wallets have been in the works since 2021.
- US Justice Department Urges More Coordination to Combat Crypto Crime: A new report from the Justice Department responds to this year’s executive order from President Joe Biden, marking some of the first recommendations produced by the order.
- IRA Financial Sues Gemini Over $37M Crypto Heist: The lawsuit corroborates earlier reporting that hackers deployed a police SWAT team as “a ruse to distract IRA employees” on the day of the attack.
- Human Rights Leaders Urge Congress to Take 'Open-Minded' View on Bitcoin: Human rights activists have urged Congress to learn about bitcoin and its use in nations suffering conflict and hyperinflation.
Most digital assets in the CoinDesk 20 ended the day lower.
|Cardano||ADA||+3.9%||Smart Contract Platform|
|Solana||SOL||−4.4%||Smart Contract Platform|
|Cosmos||ATOM||−3.6%||Smart Contract Platform|
Sector classifications are provided via 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.
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