23 May 2022

The market has taken a breather

After a hefty and brutal start of May, the market has taken a welcoming breather, with bitcoin stabilizing in the $28,000-30,500 range.
Market update (5).svg
Bitcoin (-3%) and ether (-4%) have continued moving in a tight tandem in the last seven days as the BTC-ETH correlation still climbs, now sitting at an extreme 0.922. Meanwhile, BNB has seen an uplifting week, seeing 8% gains after outperforming BTC and ETH over the weekend.Amid the slow markets, the Fear and Greed index has touched new rare lows of 8, while hedging seems to be the consensus play in both perps and options.
Source: Tradingview (Coinbase, Binance US)
In terms of correlations, the picture remains largely unchanged compared to the previous weeks, but we note that the negative correlation to gold has seen a substantial decline, while BTC’s correlation to the S&P 500 has also seen a slight decline. Nevertheless, correlations between bitcoin and equities remain at extremely high levels, far from showing any substantial signs of decoupling.
Source: CoinMetrics
Crypto sell-off flattening out
So far in May, the bitcoin price has fallen 24%, the Large Cap Index has decreased 27%, the Mid Cap Index is down 31%, and the Small Cap Index has plummeted 37%.Most of these price decreases came at the start of the month, as all indexes have traded relatively flat in the last couple of weeks. The Small Cap Index has rebounded slightly from the middle of the month.The bitcoin dominance remains elevated, sitting at highs not seen since October last year.
Source: Bletchley Indexes
The bitcoin spot volume descends from the summit
After climbing to its highest peak since May 2021, just below $10 billion, the 7-day average real* bitcoin spot volume has now retracted to $4 billion - a more normal level in 2022. This volatility in the spot volume showcases how fast the trading activity can change for bitcoin.
Source: Skew, Tradingview (Binance, Binance US, Bitfinex)
Bitcoin’s volatility is back to normal
During the past seven days, bitcoin has been rangebound between $29,000 and $30,500, leading the 7-day volatility to decrease to more normal levels for the year after almost hitting yearly highs last week. Unlike the previous week, not much has been happening in the market over the past seven days, further confirmed by the decreasing spot volume.
Source: Tradingview (Coinbase)
Eight red weeks in a row for bitcoin – A new record
Over the past seven days, the bitcoin price has been rangebound, trading between $29,000 and $30,500. Still, the price is slightly down, marking the eighth consecutive red week.Bitcoin has established support at around $29,000 and currently trades just above this level. The $29,000 area acted as critical support last July, marking the lowest point of that summer's bear market.Towards the downside, the $25,000 bottom from May 12th is the closest support level below $29,000. Below $25,000, the next critical support level sits around $20,000, the 2017 peak.Towards the upside, $30,500 has been a strong resistance area over the last week. If BTC breaks out of resistance, $35,000 is the next key resistance area.Further toward the upside, bitcoin has further resistance at $38,000. This level was an important support area during the Q1 consolidation phase.
Source: Tradingview (Coinbase)
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