Market Wrap: Altcoins Outperform as Bitcoin Stabilizes Around $30K

BTC rose by 4% over the past 24 hours, compared with a 19% rally in MATIC.

May 10, 2022 at 8:34 p.m. UTC

Updated Nov 15, 2022 at 11:57 a.m. UTC

Damanick was a crypto market analyst at CoinDesk where he wrote the daily Market Wrap and provided technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio strategist and does not invest in digital assets.

Krisztian Sandor

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.

Follow @sndr_krisztian on Twitter

Crypto markets were less volatile on Tuesday as some traders stepped in to buy the dip.

Bitcoin's (BTC) price stabilized at around $30,000, which is the bottom of a year-long trading range. The cryptocurrency appears to be oversold, similar to what occurred in late January, which preceded a brief relief rally. Still, some analysts are cautious, pointing to risks in the stablecoin market.

On Tuesday, U.S. Treasury Secretary Janet Yellen discussed ongoing distress in stablecoin UST during her testimony before a U.S. Senate panel. Yellen's comments came just hours after the purportedly dollar-pegged token plummeted to a low of $0.61 over the past 24 hours and at least one platform halted trading it.

"I think that simply illustrates that this is a rapidly growing product, and that there are risks to financial stability, and we need a framework that's appropriate," Yellen said.

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Most alternative cryptos (altcoins) outperformed bitcoin on Tuesday, suggesting a greater appetite for risk among short-term traders. For example, Polygon's MATIC token rallied by as much as 19% over the past 24 hours, compared with a 15% rise in SHIB and a 4% rise in BTC over the same period.

Typically, BTC declines by less than altcoins during market recoveries because of its lower risk profile relative to smaller tokens.

Latest prices

●Bitcoin (BTC): $31,345, −0.12%

●Ether (ETH): $2,356, +2.28%

●S&P 500 daily close: $4,001, +0.25%

●Gold: $1,837 per troy ounce, −1.11%

●Ten-year Treasury yield daily close: 2.99%

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.

Exchange inflows spike

The chart below shows the recent spike in the transfer volume of BTC onto exchanges. The latest uptick is the highest since March 2020, when BTC fell by 50% during the coronavirus pandemic-induced sell-off.

Theoretically, exchange inflows suggest that traders are looking to sell their crypto assets, whereas outflows occur when traders are moving tokens to storage (digital wallets) and by doing so will incur a transaction cost.

The latest uptick in BTC exchange inflows could be a sign of capitulation, similar to what occurred at previous price bottoms. Further, bitcoin's trading volume exceeded the recent peak in January and sentiment indicators show extreme bearishness among traders. That typically results in a relief rally.

Bitcoin's extended drawdown

Bitcoin's drawdown, or the percentage decline from peak to trough, suggests a short-term price low, similar to what occurred in January. During bear markets, however, drawdowns can extend toward 60%-80%, compared with the current 53% peak-to-trough decline.

Bitcoin has experienced lower drawdowns since the 2018 crypto bear market, which is consistent with its long-term uptrend, defined by a series of higher price lows.

Still, unlike previous conditions, bitcoin's current correlation with the S&P 500 is at an all-time high. That means the cryptocurrency is more sensitive to traditional market influences such as interest rates and current events.

Altcoin roundup

(Un)stablecoin and UST turmoil: The fight goes on for TerraUSD (UST), a $16 billion algorithmic stablecoin, as it is exchanging hands for far below its $1 dollar peg. Luna Foundation Guard, the organization that was set up for crises just like this, seems to have deployed all of its $3 billion bitcoin holdings as a loan to market makers but claims it hasn’t spent any of it. Read more here.
ETH and BTC move in lockstep: Correlation of returns between bitcoin (BTC) and ether (ETH) has been increasing over the past few months and has reached its highest level since early summer of 2020, Tuesday’s Coin Metrics report shows. With volatility picking up on the crypto markets, the different tokens within the digital asset class are trading more closely with one another. Read more here.
Boba slashes gas fees: Boba Network announced it implemented single-token gas payments on its blockchain, allowing users to pay 25% less in gas fees if they use boba token (BOBA) instead of ether (ETH). Boba is an Ethereum scaling system said to have fast transactions and fees up to 60 times lower than on Ethereum. Expensive transaction costs called gas fees are caused because of congestion, which has been an ongoing issue for users as most decentralized finance and non-fungible token (NFT) transactions take place on the Ethereum network. Read more here.

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Chilean Digital Peso Would Need to Work Offline, Central Bank Governor Says: Design principles are due out later this week, though no final decision has been taken on the digital peso.
UST Woes Draw Spotlight in Janet Yellen's Senate Hearing on Financial Risks: Treasury Secretary Janet Yellen highlighted the latest news on the UST algorithmic stablecoin losing its dollar peg during a Senate Banking Committee hearing.
Michael Saylor Suggests MicroStrategy Will Never Sell Its Bitcoin: The plunging price of bitcoin raised questions about whether the company might soon receive a margin call from its lenders.
Argentina Bears Down on Crypto Miners Amid Power Shortage: Some registered companies saw a 400% increase in their electricity bills in March, while unregistered miners do not plan to stop using subsidized residential tariffs.

Other markets

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

Biggest Gainers

Asset	Ticker	Returns	DACS Sector
Polygon	MATIC	+9.0%	Smart Contract Platform
XRP	XRP	+4.4%	Currency
Ethereum	ETH	+2.5%	Smart Contract Platform

Biggest Losers

Asset	Ticker	Returns	DACS Sector
Algorand	ALGO	−4.1%	Smart Contract Platform
EOS	EOS	−2.6%	Smart Contract Platform
Filecoin	FIL	−1.9%	Computing

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.