Market Wrap: Altcoins Outperform As Bitcoin Stabilizes Around $30K
By Damanick Dantes, Krisztian Sandor
BTC rose by 4% over the past 24 hours, compared with a 19% rally in MATIC.
Crypto markets were less volatile on Tuesday as some traders stepped in to buy the dip.
Bitcoin’s (BTC) price stabilized at around $30,000, which is the bottom of a year-long trading range. The cryptocurrency appears to be oversold, similar to what occurred in late January, which preceded a brief relief rally. Still, some analysts are cautious, pointing to risks in the stablecoin market.
On Tuesday, U.S. Treasury Secretary Janet Yellen discussed ongoing distress in stablecoin UST during her testimony before a U.S. Senate panel. Yellen’s comments came just hours after the purportedly dollar-pegged token plummeted to a low of $0.61 over the past 24 hours and at least one platform halted trading it.
“I think that simply illustrates that this is a rapidly growing product, and that there are risks to financial stability, and we need a framework that’s appropriate,” Yellen said.
Most alternative cryptos (altcoins) outperformed bitcoin on Tuesday, suggesting a greater appetite for risk among short-term traders. For example, Polygon’s MATIC token rallied by as much as 19% over the past 24 hours, compared with a 15% rise in SHIB and a 4% rise in BTC over the same period.
Typically, BTC declines by less than altcoins during market recoveries because of its lower risk profile relative to smaller tokens.
Exchange inflows spike
The chart below shows the recent spike in the transfer volume of BTC onto exchanges. The latest uptick is the highest since March 2020, when BTC fell by 50% during the coronavirus pandemic-induced sell-off.
Theoretically, exchange inflows suggest that traders are looking to sell their crypto assets, whereas outflows occur when traders are moving tokens to storage (digital wallets) and by doing so will incur a transaction cost.
The latest uptick in BTC exchange inflows could be a sign of capitulation, similar to what occurred at previous price bottoms. Further, bitcoin’s trading volume exceeded the recent peak in January and sentiment indicators show extreme bearishness among traders. That typically results in a relief rally.
Bitcoin exchange flows (Glassnode)
Bitcoin’s extended drawdown
Bitcoin’s drawdown, or the percentage decline from peak to trough, suggests a short-term price low, similar to what occurred in January. During bear markets, however, drawdowns can extend toward 60%-80%, compared with the current 53% peak-to-trough decline.
Bitcoin has experienced lower drawdowns since the 2018 crypto bear market, which is consistent with its long-term uptrend, defined by a series of higher price lows.
Bitcoin drawdown (CoinDesk, Koyfin)
Still, unlike previous conditions, bitcoin’s current correlation with the S&P 500 is at an all-time high. That means the cryptocurrency is more sensitive to traditional market influences such as interest rates and current events.
Bitcoin correlations (Coin Metrics)
(Un)stablecoin and UST turmoil: The fight goes on for TerraUSD (UST), a $16 billion algorithmic stablecoin, as it is exchanging hands for far below its $1 dollar peg. Luna Foundation Guard, the organization that was set up for crises just like this, seems to have deployed all of its $3 billion bitcoin holdings as a loan to market makers but claims it hasn’t spent any of it. Read more here.
ETH and BTC move in lockstep: Correlation of returns between bitcoin (BTC) and ether (ETH) has been increasing over the past few months and has reached its highest level since early summer of 2020, Tuesday’s Coin Metrics report shows. With volatility picking up on the crypto markets, the different tokens within the digital asset class are trading more closely with one another. Read more here.
Boba slashes gas fees: Boba Network announced it implemented single-token gas payments on its blockchain, allowing users to pay 25% less in gas fees if they use boba token (BOBA) instead of ether (ETH). Boba is an Ethereum scaling system said to have fast transactions and fees up to 60 times lower than on Ethereum. Expensive transaction costs called gas fees are caused because of congestion, which has been an ongoing issue for users as most decentralized finance and non-fungible token (NFT) transactions take place on the Ethereum network.
Most digital assets in the CoinDesk 20 ended the day higher.
|Polygon||MATIC||+9.0%||Smart Contract Platform|
|Ethereum||ETH||+2.5%||Smart Contract Platform|
|Algorand||ALGO||−4.1%||Smart Contract Platform|
|EOS||EOS||−2.6%||Smart Contract Platform|
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