Market Wrap: Cryptos Pare Earlier Losses, Bitcoin Outperforms

Bitcoin (BTC) briefly rose above $30,000 on Tuesday, extending its weeklong trading range higher.

Most cryptocurrencies appear to be stabilizing alongside stocks, which indicates a pause in bearish sentiment among traders. Some technical indicators applied to BTC and the S&P 500 remain in oversold territory, although long-term charts suggest limited upside from here.

Some alternative cryptos (altcoins) rallied on Tuesday, albeit within a six-month downtrend. For example, Solana's SOL token rose by as much as 2% over the past 24 hours, compared with a 3% rise in BTC over the same period. Still, SOL is down by 50% over the past month, compared with a 35% drop in ether (ETH) and a 27% decline in BTC.

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On the regulatory front, Alessio Evangelista, associate director for enforcement at the U.S. Treasury Department's Financial Crimes Enforcement Network, spoke at a Thursday conference where he directed the crypto industry to proactively blacklist “problematic” wallets. Also, finance ministers from the Group of Seven (G-7) large developed economies are preparing to call for faster global crypto regulations, according to Reuters.

In traditional markets, stocks were mixed, while gold, a traditional safe haven asset, ticked higher. Meanwhile, the U.S. dollar turned lower after reaching its highest level in four years last week.

Latest prices

●Bitcoin (BTC): $29,998, +2.56%

●Ether (ETH): $1,995, +1.20%

●S&P 500 daily close: $3,901, −0.58%

●Gold: $1,842 per troy ounce, +1.42%

●Ten-year Treasury yield daily close: 2.85%

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.

Bitcoin's relative strength

Bitcoin has been outperforming other cryptos over the past few months, which indicates a lower appetite for risk among traders.

Typically, bitcoin declines less than altcoins in a down market because of its lower risk profile relative to smaller tokens. The opposite is true in a rising market.

Only 15% of the top 50 altcoins have performed better than bitcoin over the past 90 days, according to the Blockchain Center. That indicates an aversion to risk.

Over time, however, a sustained rally in altcoins could signal a risk-on environment, similar to what occurred in January and August of last year.

The chart below shows the bitcoin dominance ratio, or BTC's market cap relative to the total crypto market cap. The ratio broke above a short-term downtrend last week and continues to tick higher. A sustained reading above 50% would signal a risk-off environment similar to what occurred in 2018.

Altcoin roundup

• Hashed Wallet takes a $3.5B hit after Terra's LUNA collapse: Delphi Digital says LUNA tokens accounted for 13% of its assets under management at their peak, while Hashed, an early-stage venture firm, appears to have lost over $3.5 billion. It's the latest fallout from the loss of confidence in Terra's UST stablecoin. Further, local media in South Korea report that more than 200,000 investors in the country hold Terra-related tokens. South Korea’s newly elected president, Yoon Suk-yeol, is pro-crypto and has promised a regulatory framework for the asset class. Read more here.
• Tether cut commercial paper reserve by 17%: The reduction occurred in the first quarter, according to its latest attestation report. The reduction in commercial paper has continued with a further 20% cut since April 1, which will be reflected in the second-quarter report, Tether announced Thursday. On June 30, 2021, commercial paper and certificates of deposit totaled $30.8 billion, or 49% of Tether's assets at that time. Read more here.
• Magic Eden tops OpenSea in daily trading volume: The Solana non-fungible token (NFT) market is beginning to find its stride, with daily transactions on the ecosystem’s leading marketplace, Magic Eden, now topping OpenSea, its Ethereum blockchain counterpart. According to weekly data from DappRadar, Magic Eden has seen roughly 275,000 daily transactions, which includes purchases, bids and listings, compared with OpenSea’s 50,000, according to weekly data from DappRadar. Read more here.

Relevant insight

• Panama President Considers Vetoing Crypto Regulation Legislation: The bill was approved during a plenary session of the Legislative Assembly by a 40-0 vote on April 28.
• US Treasury Official Warns Crypto Industry to Proactively Sanction 'Problematic' Wallets: FinCEN Associate Director Alessio Evangelista said crypto service providers shouldn't wait for the government to designate a wallet if it's being used for illicit activity.
• Fed Vice Chair Pick and Ex-Ripple Adviser Tells Senators Crypto Needs Regulation: Former U.S. Treasury official Michael Barr fielded questions about crypto during his Senate nomination hearing.
• MicroStrategy’s New CFO Says Bitcoin Strategy Unchanged Amid Market Drop: Report: Andrew Kang spoke to the Wall Street Journal Wednesday regarding MicroStrategy's bitcoin strategy.

Other markets

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

Biggest Gainers

Asset Ticker Returns DACS Sector Litecoin LTC +3.9% Currency Bitcoin BTC +2.8% Currency Internet Computer ICP +2.3% Computing

Biggest Losers

Asset Ticker Returns DACS Sector Algorand ALGO −4.4% Smart Contract Platform Stellar XLM −3.0% Smart Contract Platform Polygon MATIC −1.6% 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.