Solana, Ether Lead Gains in Relief Rally, but Traders Say Macroeconomic Concerns Remain

Crypto markets saw a brief rally in the past 24 hours, adding some 9.7% to market capitalization after a difficult weekend that saw prices of several coins plunge as much as 15%.

Bitcoin (BTC) fell to as low as $18,000 in a move that sent the asset below its 2017 highs, with investors locking in a record amount of losses as per on-chain data. Ether (ETH) dropped to $929.

In the past 24 hours, however, Solana’s SOL and ether led gains among the top 10 coins by market capitalization with a 9% bump, while Cardano’s ADA and Polkadot’s DOT rose 7%. Bitcoin saw rejection at $21,000 after a brief recovery.

Outside of the top 10, Avalanche’s AVAX jumped 14%, Polygon’s MATIC added 12% and ApeCoin’s APE rose 16%.

A relief rally

Analysts at Bitfinex’s trading desk said the market jump displayed the inherent volatility of cryptocurrencies.

“While the trend of market turbulence is unlikely to recede as central banks call the shots amid an increasingly uncertain geopolitical environment, today’s relief rally demonstrates a latent potential for the price of digital tokens to rebound quickly,” the desk said in a message to CoinDesk.

Most of the crypto gains came amid a jump in broader equity markets as U.S. markets remain shut for the Juneteenth federal holiday. European stock index Stoxx 600 added 0.7%, Germany’s DAX gained 0.58% and Hong Kong’s Hang Send added 0.42%. Japan’s Nikkei 225 lost 0.72%, while the Shanghai Composite finished with nominal losses on Monday.

Market observers, however, remained unconvinced that Monday’s rally in cryptocurrencies will extend into the coming days.

“The market is highly dependent on the [Federal Reserve interest] rate, and inflation is breaking records with the macroeconomic factor remaining heavy,” said Anton Gulin, regional director at crypto exchange AAX. “Uncertainty prevails in the market, and relief rallies do not significantly change this picture.”

“Such market moves are a decent opportunity for daytraders but not for investors aiming to cut risks. We shall watch out for how the macro rhetorics change by autumn to see the mid-term direction of the markets,” Gulin added.

U.S. Federal Reserve Chair Jerome Powell hiked rates by 75 basis points last week as the agency combats rising inflation and strives to bring costs under control. Inflation hit 8.6% in May, an increase of 0.3 percentage points from analyst expectations, and several more rate hikes are expected before September.

'We haven't hit the bottom yet'

Some say such a macroeconomic climate is unlikely to support the continued recovery of the crypto market.

“Even though the recent price action has provided somewhat of a sigh of relief for bitcoin prices, it’s foolish to forgo the wider macro context in which crypto and finance operate,” Andrey Diyakonov, chief commercial officer at Choise, said in a Telegram message.

“Commodities market indicators and [European Union] bonds market meltdown spell out worrying predictions for the world economy,” Diyakono stated, adding recent troubles seen at the crypto lender Celsius and prominent fund Three Arrows Capital have added to "crypto industry uncertainty.”

“We haven’t hit the bottom yet,” Diyakonov concluded.

Vasja Zupan, president of crypto exchange Matrix, seconded the sentiment.

“I don't see bitcoin quickly returning to all-time high levels. We should probably brace ourselves for a long period of uncertainty during the crypto winter,” Zupan said in a Telegram message, adding a “strong recovery” to all-time highs could be on the cards when market sentiment turns positive.

“Bitcoin is also heavily influenced by global market sentiment, and when that changes, the asset will move much faster than other markets,” Zupan said.

Support for bitcoin exists at the $18,000 mark if the asset loses current trading levels, price charts show.

Read more: Bitcoin Sees Resistance at $21K as Investors Record Losses of Over $7B: Glassnode