Market Wrap: Bitcoin Stabilizes as Bearish Sentiment Pauses
The relief bounce in stocks and cryptos could be short-lived as recession risks linger.
Cryptocurrencies were mixed on Wednesday as bitcoin (BTC) stabilized around $39,000.
Sentiment among traders remains neutral to bearish, albeit less so compared with earlier this week. For example, despite the recent pullback in price, dogecoin (DOGE), a speculative dog-themed meme coin, is up 5% over the past week, compared with a 5% decline in BTC over the same period.
Analysts noticed signs of buyer demand around $38,000 in bitcoin, although it remains to be seen if the cryptocurrency can break above its short-term downtrend. For now, bitcoin appears to be "falling out of the window, but latching onto the windowsill," Alex Kuptsikevich, an analyst at FxPro, wrote in an email to CoinDesk.
Overall, choppy trading across cryptos and stocks indicates uncertainty among traders, especially as macroeconomic and geopolitical risks linger.
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On Wednesday, Deutsche Bank (DB) published its world economic forecast, which sees a U.S. recession by the end of 2023. The bank also mentioned that risks are skewed toward a much more significant recession, or a "hard landing," driven by tighter monetary policy and rising inflation. Investors tend to reduce their exposure to speculative assets during times of slowing economic growth.
●Bitcoin (BTC): $39,047, +2.70%
●Ether (ETH): $2,864, +1.65%
●S&P 500 daily close: $4,184, +0.21%
●Gold: $1,887 per troy ounce, −0.78%
●Ten-year Treasury yield daily close: 2.82%
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.
Bitcoin's volume drift
The chart below shows bitcoin's trading volume over the past two years. A surge in trading activity typically occurs around price peaks, similar to April and November of last year, which preceded significant sell-offs in price.
This time, however, trading volume has been relatively low, which means some buyers have remained on the sidelines.
Bitcoin's choppy price range has also kept volatility anchored to its lowest level in a year. Further, option traders expect less turbulence going forward, which could point to a more gradual sell-off in BTC's price until buyers return with conviction.
"Many investors traded on volatility in April, and most took long positions," Deribit, a crypto derivatives exchange, wrote in a blog post. "However, volatility has not returned to its high level as expected, and investors are still waiting for volatility to rise."
"For investors who bought volatility earlier, there seems to be a long way to go from making profits," Deribit wrote.
- LUNA supply drops to all-time-low: The supply of LUNA, the native token of the Terra blockchain, fell to an all-time low level on Tuesday – a price-boosting dynamic that's seen by crypto analysts as an indicator of how popular the project remains despite nagging concerns about its sustainability. LUNA's circulating supply – the number of tokens on the market – slid to 346 million from 355 million a month earlier and a high of 482 million in November, according to Smart Stakehttps://terra.smartstake.io/history/3650, a data tracker platform focused on the Terra ecosystem. Read more here.
- Founders Fund, Pantera invest in DeFi investment bank Ondo Finance: Ondo Finance, a protocol aiming to accelerate the adoption of decentralized finance (DeFi) among mainstream investors by mitigating risk, has raised $20 million in a Series A round co-led by Peter Thiel’s Founders Fund and crypto firm Pantera Capital. Read more here.
- Ethereum Optimism rollup launches DAO, announces long-awaited airdrop: The popular Ethereum layer 2 Optimism rollup announced on Tuesday it will be forming a decentralized autonomous organization, or DAO, dubbed the Optimism Collective. Along with this news, Optimism set Crypto Twitter alight with the announcement of a long-awaited Optimism (OP) token and airdrop, according to CoinDesk’s Sam Kessler. Read more here.
- Listen 🎧: Could bitcoin actually reach $1 million per token? The CoinDesk Markets Daily podcast is back with the latest news and insights.
- Evmos, the EVM-Compatible Cosmos Chain, Mounts a Comeback: After a botched launch in March, the blockchain has relaunched with new tools for users looking to claim airdropped tokens.
- EU Crypto Laundering Plans Could Overwhelm Authorities, Bank Regulator Says: Officials urged lawmakers to think again as they approach the last stage of privacy-busting proposals.
- CFTC Sets May Roundtable to Weigh Ideas Sparked by FTX’s Derivatives Push: The May 25 discussion will consider direct clearing of derivatives as pitched by FTX.US.
- Flexa Expands Payments Suite for Multiple Cryptocurrencies and Wallets: Flexa said its new feature will allow over 99 digital currencies for payment options.
- Hong Kong Monetary Authority Invites Views on Retail CBDC: The authority is studying design considerations such as issuance, interoperability with other payment systems, privacy and data protection.
Most 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.
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