15 May 2022

Peak fearfulness in the markets

The bitcoin price fell 13% over the past seven days, finishing its seventh straight red week for the first time in its existence, as the state of extreme fear persists
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ETH and BNB remain highly correlated with bitcoin and are down 18% and 20% over the past seven days.The crypto market is currently in a state of extreme fear, both caused by the UST de-pegging, as well as fear spillover from the broad financial markets, with bitcoin’s correlation with the S&P 500 sitting close to all-time highs.
Source: Tradingview (Coinbase, Binance US)
By far the most important happening in the crypto market last week was LFG selling 80,000 BTC against UST in their failed attempt to protect UST’s peg. This massive selling pressure undoubtedly was one of the primary contributors to bitcoin’s poor performance last week. Read more about it in this article.
Source: CoinGecko,
Unsurprisingly, LUNA (Terra) is the worst performer over the past seven days after losing 100% of its value.
Bitcoin dominance increasing
Bitcoin’s role as the most trusted cryptocurrency has been clear over the past week, as its market share is climbing while the market is crashing.Although the bitcoin price is down 13% over the past seven days, we see a massive increase in the bitcoin dominance. After increasing by 2.9%, it’s now sitting at 44.4%, the highest level since October.
Source: CoinMarketCap
The current fear in crypto markets is pushing capital that was previously invested in altcoins into bitcoin, which is considered a safer bet.USDT, USDC, and BUSD have also gained market share over the past week, but not as much as we normally see during a downtrend.Last week’s implosion of the algorithmic stablecoin UST led to withdrawals from certain other stablecoins as well. USDT lost 10% of its market cap during the previous seven days, with the panic resulting in its peg being challenged. Some of that may have moved to USDC, as the market cap of the second-largest stablecoin increased after the incident. However, this could very likely be related to arbitrageurs redeeming USDT as the peg got challenged.
Source: Bletchley Indexes
The broad crypto market continues struggling in May, with Bitcoin down 23%, the Large Caps decreasing 23%, Mid Caps falling 31%, and the Small Caps down 37%. This sequence in the indexes’ performance is typical during bear markets.
Extreme fearfulness in the broad financial markets
The Fear and Greed Index has signaled extreme fear for almost one month, an unusually long period of such a negative market sentiment. Crypto market participants are not alone in feeling extremely fearful, as CNN's Fear & Greed Index for the stock market bottomed at 7 last week, the most fearful level since the covid-crash more than two years ago. We have seen this general fearfulness play out in the financial markets as traditional safe-haven assets like the USD has increased in value relative to most other assets.
Seven red weeks in a row for bitcoin – First time in its existence
Another red week for bitcoin, as the price fell all the way down to ~$25,300 last week before recovering sharply.This marked the seventh consecutive red week for bitcoin. This has never been seen before in bitcoin’s existence and clearly shows the bearish sentiment in the market at the moment.We have to go back to December 2020 to find the last time bitcoin was below $25,500. However, the price bounced quickly this week and closed above $31,000.
Source: Tradingview, Bitstamp
Looking at weekly candles, last week’s close was still below all weekly closes from 2021 and 2022, and technically a bearish signal.With some weekly lows around $28,000, bulls are now hoping for that to act as the next weekly support level.A weekly close above $32,000 will technically be a bullish signal and could be a sign of reversal. As mentioned last week, the next major support level below $28,000 is found down at the previous ATH of ~$20,000Looking at daily candles, both the $26,000 and the $23,000 level could be new support areas if the price continues its downtrend.
Bitcoin spot volume continues higher
The 7-day average real* bitcoin spot volume continues to increase and is now sitting just below this year’s high from January. Four of the previous seven trading days saw more than $10 billion in volume, as the combination of the Luna situation and the general fearfulness in the financial markets spurred increased trading activity. As usual, volumes calmed down over the weekend, but the weekend still saw almost twice as high volumes as the average weekend volume in April.
Source: Skew, Tradingview (Binance, Binance US, Bitfinex)
Volatility pushing towards yearly high
Bitcoin’s 7-day volatility continues increasing and is now sitting close to its highest level in 2022. Unlike the last volatility spike in March, bitcoin’s elevated volatility this time was caused by several sizeable downwards price movements. This chart only considers the daily volatility, and although it has been high lately, the intraday volatility has been even more elevated, reaching its highest level in one year.
Source: Tradingview (Coinbase)
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