Market Wrap: Bitcoin Stabilizes as Bearish Sentiment Pauses

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.

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.

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.