Market Wrap: Cryptos Decline Amid Choppy Trading, DeFi Tokens Underperform

Aversion to risk remains as volatility returns to stocks and cryptos.

AccessTimeIconMay 20, 2022 at 8:43 p.m. UTC
Updated May 20, 2022 at 8:47 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) traded in a choppy range over the past week as volatility ticked higher. That could reflect uncertainty among crypto traders.

BTC was down by 3% over the past 24 hours and is roughly flat over the past week. Meanwhile, several alternative cryptos (altcoins) underperformed on Friday. For example, Solana's SOL token was down by 5%, and Avalanche's AVAX token was down by 4% over the past 24 hours.

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On Friday, the S&P 500 briefly fell into bear market territory, declining by more than 20% from its record high in January. Volatility remains elevated in both stocks and cryptos, while gold, a traditional safe haven asset, ticked higher on Friday.

On the macroeconomic front, some analysts expect selling pressure to wane in stocks, which could benefit cryptos short term. Bitcoin has been increasingly correlated with the S&P 500 over the past year.

"It is premature to worry about an approaching recession until the bond market and central banks push monetary conditions into restrictive territory, which we do not expect in 2022," MRB Partners wrote in a Friday email. The firm expects a window of opportunity for equity markets to rebound as global growth conditions prove resilient, assuming interest rate expectations and bond yields calm down soon.

Latest prices

Bitcoin (BTC): $29,278, −2.48%

Ether (ETH): $1,968, −1.58%

S&P 500 daily close: $3,901, +0.01%

Gold: $1,844 per troy ounce, +0.12%

Ten-year Treasury yield daily close: 2.79%


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.

DeFi underperforms

Decentralized finance (DeFi) tokens have underperformed bitcoin over the past month. Typically, DeFi and other altcoins underperform in a down market because of their higher risk profile relative to bitcoin.

The CoinDesk DeFi Index (DFX) is down by 33% over the past month, compared with a 23% decline in the CoinDesk Bitcoin Price Index (XBX) over the same period.

Over the past week, however, DFX has stabilized. Recent gains in AAVE have helped, while a 17% drop in CRV token has detracted from the overall index's performance over the past week.

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BTC and DeFi token returns (CoinDesk)

Altcoin roundup

  • The fall of Terra: CoinDesk's Krisztian Sandor and Ekin Genç packaged a detailed timeline of Terra's journey from its underdog start as a payments app in South Korea to a $60 billion crypto ecosystem to one of the biggest failures in crypto. Read more here.
  • Luna Foundation Guard has no plans for AVAX: Avalanche, a smart-contract blockchain, said in a tweet that Luna Foundation Guard (LFG) – the entity behind the reserve fund set up to backstop the Terra blockchain's now-failed UST stablecoin – has “disclosed no plans” for the 2 million AVAX tokens that are now sitting in its treasury. With the token's price fluctuating at around $30, the market value of the AVAX stash is about $60 million, making it the second-largest holding in LFG’s dwindling $240 million treasury. Read more here.
  • Terra's DeFi apps at a loss: Data from trackers shows funds held in DeFi applications built on Terra slumped to $155 million in locked value as of Friday morning, a level last seen in February 2021, from more than $29 billion at the start of this month. Locked value on Terra DeFi peaked at $30 billion in early April. The declines came as UST lost its 1:1 peg against the U.S. dollar amid a broader slump in markets. Read more here.

Relevant insight

Other markets

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

Biggest Gainers

Asset Ticker Returns DACS Sector
Cosmos ATOM +6.1% Smart Contract Platform
Algorand ALGO +0.5% Smart Contract Platform
Bitcoin Cash BCH +0.3% Currency

Biggest Losers

Asset Ticker Returns DACS Sector
Litecoin LTC −2.6% Currency
Solana SOL −2.5% Smart Contract Platform
Bitcoin BTC −2.4% Currency

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

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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.

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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.

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