Market Wrap: Crypto Sentiment Improves, Though Risk Remains as Russia Plays Down Peace Talks

Bitcoin (BTC) traded in a tight range between $46,000 and $47,000 during the New York trading day as geopolitical risk kept some buyers on the sidelines.

On Wednesday, Russian diplomats stated that peace talks with Ukraine haven't reached a turning point. Meanwhile, fighting intensified between the two nations, which contributed to an uptick in oil and gold prices.

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Still, most alternative cryptocurrencies (altcoins) outperformed bitcoin on Wednesday, which suggests traders are still comfortable with additional risk. For example, AAVE and Solana's SOL token rose by as much as 7% over the past 24 hours, compared with a 1% gain in bitcoin over the same period.

The bitcoin Fear & Greed Index entered "greed" territory, which indicates bullish sentiment among crypto traders.

The index is at its highest level this year, but is still below peak levels of "extreme greed" seen last November. That suggests further room for investor sentiment to improve, especially if BTC's price recovery is sustained.

Over the past few months, however, sentiment readings have been erratic as BTC declined by as much as 50% and then stabilized in a trading range, albeit with 20% price swings. It is very difficult to get a clear reading on crypto sentiment, especially during times of market stress.

"Market participants should keep in mind that every time we have shown the slightest sign of greed this spring, the market has slammed us back into a fearful state," Arcane Research wrote in a report.

Bitcoin's market capitalization relative to the total crypto market cap, or the "dominance ratio," dipped below its 50-day moving average, which means altcoins are starting to outperform.

Typically, a declining bitcoin dominance ratio indicates a greater appetite for risk among crypto investors. In contrast, a rising dominance ratio signals a flight to safety as investors reduce their exposure to altcoins, which have a greater risk profile than bitcoin.

For now, the dominance ratio is stabilizing after a sharp decline last year. A base of around 40% is seen in the chart below, which is above the previous low of 35% reached in 2018.

Digital assets in the CoinDesk 20 ended the day higher.

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.