Market Wrap: Bitcoin Outperforms as Crypto Bulls Take a Breather

Bitcoin (BTC) reached as high as $45,000 on Friday, although buyers lost momentum later in the New York trading day.

Most alternative cryptocurrencies (altcoins) underperformed BTC on Friday, suggesting a lower appetite for risk among crypto traders heading into the weekend. Further, bitcoin's dominance ratio, or BTC's market cap relative to the total crypto market cap, ticked higher, reversing a short-term downtrend over the past few days.

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It appears that crypto bulls are taking a breather, tracking price moves in equities. The S&P 500 and Nasdaq indexes were mostly flat on Friday. From a technical perspective, bitcoin and stocks are approaching short-term resistance levels, which could stall the current relief rally over the next few days.

Still, pullbacks could be brief as some technical indicators point to further upside potential, especially in altcoins. For example, ether (ETH) broke above $3,000 this week and reversed its intermediate-term downtrend. That supports upside follow-through in the near term, according to Katie Stockton, managing partner at Fairlead Strategies. "We believe there is upside to resistance near $3,500 for ETH defined by the 200-day moving average," Stockton wrote in a Friday email.

Latest prices

●Bitcoin (BTC): $44,448, +1.12%

●Ether (ETH): $3,116, +0.09%

●S&P 500 daily close: $4,543, +0.51%

●Gold: $1,955 per troy ounce, −0.35%

●Ten-year Treasury yield daily close: 2.49%

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.

Time for a turnaround

Bitcoin is approaching a cycle low, according to some metrics.

The chart below from Delphi Digital shows prior instances when BTC's year-over-year return turned negative, which preceded major price troughs. A rally in altcoins could also confirm a shift from bearish to bullish sentiment, which typically signals the start of a relief rally.

Still, negative returns can persist for a few months, similar to what occurred in 2014 and 2018. Typically, bear market rallies benefit short-term traders until a decisive shift from a downtrend to an uptrend is confirmed.

"Bitcoin has yet to break out of its trading range, but we have been seeing some strength in certain pockets of the crypto market, making for better trading setups than weeks prior," Delphi Digital wrote in a Friday blog post.

Key levels to watch

For now, bitcoin's technical support and resistance levels continue to align with positioning data seen on the blockchain.

The chart below shows price bands based on the cost basis of long-term and short-term bitcoin holders relative to the current market price. The average price paid for BTC by investors who purchased after the October price high is $45,900, which is seen as resistance, according to data compiled by Glassnode.

A breakout above technical resistance at $46,000-$50,000 could put short-term bitcoin holders in a profitable position. Failure to hold above that price range, however, could encourage traders to sell at a loss.

Altcoin roundup

• Anchor Protocol to readjust interest rates: Anchor Protocol, the decentralized money market built on the Terra blockchain, will dynamically adjust interest rates each month following a community vote that passed on Thursday. With the new proposal, payout rates would increase by 1.5% if yield reserves increase and drop by 1.5% if yield reserves fall by 5%. Anchor's native token, ANC, dropped as much as 5% following the rate announcement. Read more here.
• Trading volumes moderate: BTC and ETH trading volumes on Coinbase's exchange have been lackluster over the past few weeks. Altcoins, however, have outperformed with spikes in trading volume. "Despite this volume spike, buy ratios for most coins have moderated and were mostly in the 50-60% range," David Duong, head of institutional research at Coinbase, wrote in a Friday newsletter. That means crypto buyers have less conviction on price rises, which could point to limited upside. Additionally, trading volumes of APE (a new listing on the Coinbase exchange) and the low-market cap JASMY token outpaced the most oft-traded coins such as ADA, SOL and AVAX, according to Duong.
• AVAX $100-$127 upside target: From a technical perspective, Avalanche's AVAX token is holding price support above $60 and faces resistance at $100, which is the top of a three-month-long price range. A decisive breakout of the current price range could yield additional upside (roughly 40%) toward the high of $127.30 that was reached in December.

Relevant news

• India Passes Stiff Crypto Tax Laws Despite Industry Uproar
• Janet Yellen, Sounding More Constructive, Acknowledges Crypto's Role in Finance
• Ukraine Launches ‘NFT Museum’ to Raise Funds and Remember
• EU's MiCA Bill Moves Forward Without Bitcoin Limiting Provision
• Israel's Bank Leumi to Offer Crypto Trading

Other markets

Digital assets in the CoinDesk 20 ended the day lower.

Largest winners:

Asset Ticker Returns Sector Bitcoin Cash BCH +2.6% Currency Algorand ALGO +1.3% Smart Contract Platform Bitcoin BTC +1.1% Currency

Largest losers:

Asset Ticker Returns Sector Ethereum Classic ETC −6.8% Smart Contract Platform Cardano ADA −6.3% Smart Contract Platform Solana SOL −4.4% 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.