As they feel the severity of the financial market meltdown, the crypto market is red. These unstable waters are driving the crypto market sentiment towards fear. While the flagship cryptocurrency Bitcoin saw a minor selloff, its altcoin cousins suffered significant losses. After seeing all major coins crash mid-week, the market has recovered and is now at $1.28 trillion. This represents a 3% increase in market capitalization in just 24 hours.
The Terra (Luna fiasco) has put the entire crypto market in a rut and has taken $40 Billion out of the pockets of the creators. Rising inflation and slowing growth have been major reasons. The Fed chairperson Jerome Powell told the Wall Street Journal on the 17th of May that the Fed would keep increasing interest rates by 50 basis points until inflation is under control. Powell’s focus on aggressive policy indicates that monetary conditions will likely remain tight in 2022. This could limit upside for risky assets.
According to historical data, Bitcoin (BTC), the price of Bitcoin has always fallen below its realized price. With the exception of the 2019-20 bear market, Bitcoin’s real price was below its actual price for between 299 and 114 days during previous bear cycles. If the macro environment is not favorable, a rapid recovery is unlikely. The daily closing price for Bitcoin (BTC), has fluctuated between $28,700 to $31,300 over the past nine days. Investor sentiment was impacted by the May 12 crash in TerraUSD (UST), which was previously the third largest stablecoin market cap. After the May 18 drop in composite stock index Nasdaq, it looks like there is no way to recover bitcoin’s price. It fell by 4.7%.
Recession fears were fueled by disappointing quarterly results from US retailers. Shares of Target (TG), while Walmart (WMT), fell 17% in just two days. The SandP 500 index edged into bear market territory due to fears of an economic slowdown. This is a 20% decline from its peak. The recent price drop in crypto assets has made it difficult to find long-term buyers. The open interest for options expiring on May 20th is $640m, but that number will likely be lower because bulls are too optimistic. The recent plunge below $32,000 in Bitcoin surprised buyers. Only 20% of the May 20 call options were placed below this price.
The current crash in US stock and Bitcoin markets shares many similarities with the March 2020 crash. However, market conditions may mean that the recovery will not follow the same path. The Fed provided unprecedented stimulus to markets in 2020. However, the Fed will continue to focus on tightening monetary policy and reducing inflation in 2022.
Technical Outlook
BITCOIN:
Since the beginning of the month, BITCOIN has traded mostly in red and prices have fallen almost by 34.5% to the low of $253,338. The asset made a “Long Legged Doji” candle, tested the 200-week Moving Average support and showed signs of recovery. BTC trades in a range of $28,800-31,000, with decreasing volumes. The RSI has started to rise from its oversold levels. To see a rally, BITCOIN must trade above $32,500 and maintain that level, while $28,800 or $25,500 will provide strong support.
ETH:
After facing stiff resistance at the 200 Day Moving Average and Horizontal trendline, ETH saw a sharp drop. The asset fell below the psychological level at $2k, and hit a weekly low at $1,763. ETH has reclaimed support at the key level at $1,774 (127.2% Fibonacci retracement levels) and at the horizontal trendline at $1711. The asset is currently consolidating between $1900 and $2,155, with stiff resistance at $2,000. If the breakout happens above the resistance in good volumes, then we can expect a relief rally that can take us up to $2,000.
SOLANA:
Solana faced stiff resistance at $45-$50 on a weekly basis.
It gave a breakout and had a weekly close of above $50. The stock witnessed a huge rally, and it soared to $259 SOL saw a sharp drop and prices plummeted to $37.37 after this move. The asset is currently trading in a downtrend and has formed a ‘Lower Top Lower Bottom’ pattern. Solana is looking for support at the same key level $45-50. The longer shadow is lower, which indicates that bulls are buying the dip. If the asset holds, sustains and the weekly close is above $50, then we can expect a relief rally to $80, while a close below $45 would lead to further decline.
Weekly Snapshot
USD ($)12 May 2219 May 22Previous WeekCurrent WeekCloseClose% ChangeHighLowHighLowBTC$29,048$30,3144.36%$26,350$36,130$31,308$28,703ETH$1,962$2,0182.89%$2,697$1,748$2,147$1,907SOL$44.68$52.2116.85%$84.65$38.05$53.62$46.22Cryptocurrency1w – % Vol. Change (Global)BitCoin (BTC)-37.68%Ethereum (ETH)-39.63%Solana (SOL)-26.56%Resistance 2$36,500$2,450$1.00$80.00Resistance 1$32,000$2,150$0.85$65.00USDBTCETHMATICSOLSupport 1$28,800$1,900$0.60$50.00Support 2$25,500$1,750$0.35$37.50
Market Updates
The Ropsten testnet Merge, which will be held on June 8, is being conducted by the US President Joe Biden.
*Sources of charts: https://cryptowat.ch, https://pro.zebpay.com/trade/USDT-INR
Disclaimer: This report should not be regarded as investment advice. It does not consider the financial situation or investment goals of investors. When deciding whether an investment is right for them, all investors should take into account these factors and consult with a professional advisor. This report was prepared by the Company using information that it has access to, as well as information from public sources that have not been independently verified. The Company makes no representations or warranties, either express or implied, regarding the accuracy, reliability, completeness or reliability of any information, opinions or conclusions contained herein. This report is preliminary. The Company does not assume any obligation to revise or update the reports in response to new events or circumstances after the date of the report was made. Trading and Investments in cryptocurrencies viz. Bitcoin Cash, Ethereum, and other cryptocurrencies are highly speculative investments that are subject to market risk. The Author’s analysis should be used only as information and should not be considered investment advice.
20th-May-2022 ZebPay
