Market Wrap: Cryptos and Stocks Fall; Bitcoin Trades Below $40K

Most cryptocurrencies extended losses on Tuesday, tracking declines in stocks.

Bitcoin (BTC) remains in a downtrend over the past two weeks as traders await a decisive move above or below the $40,000 price level. For now, alternative cryptos (altcoins) have gone in and out of favor over the past month, indicating uncertainty among market participants.

Dogecoin (DOGE) declined by 8% over the past 24 hours, erasing some gains from Monday's rally. Shiba Inu's SHIB token, another dog-themed meme coin, declined by 4% over the same period. Meanwhile, bitcoin was down by 3% on Tuesday, and is on track for an 18% decline over the past 30 days.

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Stocks were also lower on Tuesday, giving back most of the late-March rally. Selling pressure has been dominant so far this year as investors reduced their exposure to both stocks and cryptos. Meanwhile, the U.S. dollar is approaching a one-year high, which has been a headwind for BTC's price.

Most analysts agree that bitcoin is set for a volatile price move, but the direction remains uncertain. Some indicators suggest a breakdown could occur, while others point to a short-term price bounce.

Currently, the options market places a 60% probability that BTC will trade above $36,000 in May.

In the bitcoin futures market, the average daily basis, or the difference between the spot price and futures price, reached a one-year low. Typically, a rising basis indicates bullish sentiment among futures traders.

"The basis has only reached similar lows on two prior occasions in the last year: in July, prior to the summer short squeeze, and in February. The July low coincided with the market bottoming, whereas the February low was followed by more consolidation in BTC," Arcane Research wrote in a Tuesday report.

Also, there are signs that futures traders are becoming more active. The open interest in BTC perpetuals is currently near a one-year high, after climbing steadily since early March, with more intensive growth in recent days," Arcane wrote.

Sentiment has been slightly bearish in the futures market, which could increase the chance of a short squeeze if BTC's price jumps unexpectedly.

On the flip side, technical indicators remain neutral, although some analysts are on watch for a possible breakdown in price.

"Bitcoin has a breakdown pending confirmation this week below $40,000," Katie Stockton, managing partner at Fairlead Strategies, wrote in a report. "If confirmed, risk would increase to secondary support near $27,200."

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.