Market Wrap: Bitcoin Dips, Stocks Plummet as Volatility Spikes

Traders continue to hedge against further price declines.

AccessTimeIconMay 18, 2022 at 8:14 p.m. UTC
Updated May 18, 2022 at 8:56 p.m. UTC

Damanick was a crypto market analyst at CoinDesk where he wrote the daily Market Wrap and provided technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio strategist and does not invest in digital assets.

Bitcoin (BTC) declined by nearly 3% from a high of $30,654 on Wednesday, tracking losses in U.S. stock markets, which included a drop of over 1,200 points on the Dow Jones Industrial Average and losses of over 4% on the Nasdaq and S&P 500.

The cryptocurrency has been stuck in a tight trading range over the past few days, although volatility remains elevated. That could increase the risk of greater price swings or a potential breakdown on the charts.

For now, alternative cryptos (altcoins) continue to underperform bitcoin, indicating a lower appetite for risk among crypto traders. For example, ether (ETH) was down by 4% over the past 24 hours, compared with a 3% dip in BTC over the same period. Solana's SOL token declined by 7% and Decentraland's MANA token was down by 10% on Wednesday.

Just launched! Please sign up for our daily Market Wrap newsletter explaining what happens in crypto markets – and why.

The stock market declines came after retail and tech stocks underperformed on Wednesday. Also, the Chicago Board Options Exchange's CBOE Volatility Index (VIX), a popular measure of the stock market's expectation of volatility based on S&P 500 index options, ticked higher on Wednesday, reversing a week-long downtrend.

Latest prices

Bitcoin (BTC): $29,225, −2.67%

Ether (ETH): $1,975, −3.28%

S&P 500 daily close: $3,924, −4.03%

Gold: $1,814 per troy ounce, −0.21%

Ten-year Treasury yield daily close: 2.89%


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.

Volatility returns

Bitcoin's short-term realized volatility remains elevated as the cryptocurrency struggles to hold the $30,000 price level. And implied volatility (based on the market's expectation for movement over one week), ticked higher on Wednesday. That suggests price action could remain choppy as traders react to macroeconomic risk and turmoil in the stablecoin market.

Option market data still shows increased demand for puts versus calls, which means traders are actively hedging the risk of continued price declines.

Currently, the options market places a 66% probability that BTC will trade above $25,000 in June, according to data provided by Skew.

CoinDesk - Unknown

Bitcoin realized volatility (Skew)

CoinDesk - Unknown

Bitcoin implied volatility (Skew)

Sellers in control

The chart below shows the ratio of buy volume divided by sell volume in bitcoin's perpetual swaps market, a type of derivative trading product similar to futures in traditional markets.

Values greater than 1 indicate bullish sentiment, while values less than 1 indicate bearish sentiment. The 50-day moving average of the buy/sell volume ratio has declined over the past two months, indicating persistent selling pressure.

Further, the ratio is still above prior lows, which suggests the downtrend in BTC's price could continue until buyers return with greater conviction.

CoinDesk - Unknown

Bitcoin buy/sell volume (CryptoQuant)

Altcoin roundup

  • Do Kwon plans to put Terra back on track: Terraform Labs founder Do Kwon on Wednesday morning announced an on-chain governance proposal even as results from a preliminary online poll on a hard fork plan found minimal backing among community members. The new chain would entirely cut out the failed UST product and instead focus on decentralized finance (DeFi) applications building on Terra. Read more here.
  • Aave's decentralized social media platform arrives on Polygon: Lens Protocol opened on the Polygon blockchain mainnet Wednesday. Built by Aave Companies, it allows developers to build their own decentralized social media networks in which users fully own their data. The protocol was first announced in February, but now people can starting minting their profiles. Read more here.
  • NFT-focused venture fund: Hackathon organizer DoraHacks has raised $20 million in a funding round led by FTX Ventures, the investment arm of crypto exchange FTX, and Liberty City Ventures. The capital will be used to drive the launches of the Dora Grant DAO, a decentralized grant community, and Dora Infinite Fund, a venture fund focused on non-fungible tokens (NFT). Read more here.

Relevant insight

Other markets

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

Biggest Gainers

There are no gainers in CoinDesk 20 today.

Biggest Losers

Asset Ticker Returns DACS Sector
Bitcoin Cash BCH −7.2% Currency
Polygon MATIC −6.7% Smart Contract Platform
Polkadot DOT −6.6% Smart Contract Platform

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.

UPDATE (May 18 20:45 UTC): Adds information on the U.S. stock markets and their declines.

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Damanick was a crypto market analyst at CoinDesk where he wrote the daily Market Wrap and provided technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio strategist and does not invest in digital assets.

CoinDesk - Unknown

Damanick was a crypto market analyst at CoinDesk where he wrote the daily Market Wrap and provided technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio strategist and does not invest in digital assets.

Trending

1
CoinDesk - Unknown
Boris Johnson to Quit as Pressure From Ministerial Resignations Mounts

The departure is likely to delay the country's plans to create a friendly environment for the crypto industry.

CoinDesk - Unknown
2
CoinDesk - Unknown
Argo Blockchain Hires Derivatives Trader to Navigate Market Rout, Sells BTC to Reduce Loan

The miner saw gains in bitcoin production in June, but its margins narrowed.

CoinDesk - Unknown
3
CoinDesk - Unknown
Ethereum Scaling Solution Immutable X Will Allow Ether-to-Dollar Withdrawals

The tool is one of the first layer 2 services to allow users to withdraw U.S. dollars.

CoinDesk - Unknown
4
CoinDesk - Unknown
Animoca Brands Leads $32M Funding Round for Planetarium Labs

The capital will help the Web3 gaming company develop its community-driven network.

CoinDesk - Unknown