Market Wrap: Cryptos Recover, With Altcoins in the Lead

Bitcoin (BTC) and other cryptocurrencies stabilized on Thursday as some buyers returned from the sidelines.

Alternative cryptocurrencies (altcoins) took the lead, especially WAVES, which bounced back with a 6% return over the past 24 hours. BTC and ether (ETH) were roughly flat on Thursday, compared with a 4% rise in Pancake Swap's CAKE token and a 3% rise in AAVE over the same period.

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On the regulatory front, U.S. Treasury Secretary Janet Yellen said that a digital dollar could become a "trusted money comparable to physical cash," in her first speech on digital assets on Thursday. Yellen did not give a personal take on the crypto industry, although she acknowledged viewpoints from both proponents and skeptics of digital asset technology, and stressed the importance of assessing risks to the financial system.

Elsewhere, the S&P 500 traded higher on Thursday along with gold and the U.S. dollar.

Bitcoin's spot trading volume across exchanges declined on Thursday, according to CoinDesk data, which could indicate low conviction among traders despite the current stabilization in price.

In the bitcoin futures market, however, there was a slight uptick in short liquidations and a rise in buy volume versus sell volume over the past 24 hours, suggesting moderate bullish sentiment among short-term traders.

The chart below plots moving averages based on bitcoin's mining difficulty, which is the estimated number of hashes (computational power) required to mine and process transactions on the blockchain.

As new coins are mined into existence, miners sell some of their coins to pay for production costs, which results in bearish pricing pressure, according to Glassnode, a crypto data provider. By contrast, after miners capitulate and price stabilizes, an accumulation phase begins based on the expectation of higher prices.

In theory, other market participants would step in to achieve a "fair price" or an equilibrium following extreme peaks and troughs in a given cycle.

By averaging mining difficulty, traders can determine when miner selling and buying pressure aligns with turning points in BTC's price. Bearish signals occur when short-term moving averages compress and cross below a long-term moving average, and the opposite is true for bullish signals. Still, at times signals can lag price action by a few months.

For a deeper look at fundamental factors that influence price, see here for an analysis by David Duong, head of research at Coinbase Institutional.

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

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.