Market Update

Falling wedge pattern points to eventual Ethereum price reversal, but traders expect more pain first

ETH dropped below a key support in its USD/BTC pair, but analysts say a bullish trading pattern could eventually spark a sharp trend reversal.

The cryptocurrency market was hit with another round of selling on May 26 as Bitcoin (BTC) price dropped to $28,000 and Ether (ETH) briefly fell under $1,800. The ETH/BTC pair also dropped below what traders deem to be an important ascending trendline, a move that traders say could result in Ether price correcting to new lows.

ETH/USDT 1-day chart. Source: TradingView

Here’s a rundown of what several analysts in the market are saying about the move lower for Ethereum and what it could mean for its price in the near term.

Price consolidation will eventually result in a sharp move

A brief check-in on what levels of support and resistance to keep an eye on was provided by independent market analyst Michaël van de Poppe, who posted the following chart showing Ether trading near its range low.

ETH/USD 1-hour chart. Source: Twitter

Van de Poppe said:

“The question will be whether we can bounce from here and break the $1,940 level. If that happens, I’m assuming we’ll continue $2,050. If it doesn’t, then the markets are looking at

ETH could make new lows into a bullish falling wedge

According to Twitter analyst Crypto Tony, Ether price is “still looking for that leg down to load up on.”

ETH/USDT 4-hour chart. Source: Twitter

While it might look negative, this development is actually a positive sign, according to Cointelegraph contributor Jon Morgan, who noted that the pattern outlined on this chart is a falling wedge, a “bullish standard candlestick/bar chart pattern that is indicative of a market that has moved to an extreme and is likely to reverse.”

Morgan said:

“Very high expectancy rate of creating either a violent corrective move higher or an entirely new uptrend.”

Related: Ethereum price dips below the $1.8K support as bears prepare for Friday’s $1B options expiry

Bitcoin dominance rises

ETH/BTC 1-day chart. Source: Twitter

According to economist Caleb Franzen, the ETH/BTC pair lost a key support and this is notable because:

“This means that at least one of these statements will be true: $ETH is weakening relative to $BTC; $BTC will outperform $ETH; Alts will underperform $BTC.”

Adding to the ETH/BTC discussion, Twitter user CrediBULL Crypto noted that the price is “starting to take some of our local lows.”

ETH/BTC 3-day chart. Source: Twitter

The analyst said:

“Any relief here is temporary until we traverse to the bottom of this range, imo. In fact, we may head even lower than pictured here before staging a recovery, but will assess once we hit my target.”

In general, continued weakness with the ETH/BTC pair has the potential to result in the price of Ether and altcoins trending lower while BTC could hold at its current price or even head higher as traders rotate out of underperforming positions into Bitcoin.

The overall cryptocurrency market cap now stands at $1.235 trillion and Bitcoin’s dominance rate is 46.2%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

‘Extreme fear’ grips Bitcoin price, but analysts point to signs of a potential reversal

Sideways crypto price action persists as the Federal Reserve confirms its plan to continue raising interest rates, but analysts spot a silver lining.

The cryptocurrency market settled into a holding pattern on May 25 after traders opted to sit on the sidelines ahead of the midday Federal Open Market Committee (FOMC) meeting, where the Federal Reserve signaled that it intends to continue on its path of raising interest rates. According to data from Alternative.me, the Fear and Greed Index is seeing its longest run of extreme fear since the market crash in Mach 2020.

Crypto Fear & Greed Index. Source: Alternative

Data from Cointelegraph Markets Pro and TradingView shows that the price action for Bitcoin (BTC) has continued to compress into an increasingly narrow trading range, but technical analysis indicators are not providing much insight on what direction a possible breakout could take.

BTC/USDT 1-day chart. Source: TradingView

Here’s a look at what analysts think could come next for Bitcoin price.

Whales accumulate as Bitcoin battles to reclaim $30,000

BTC/USDT 15-minute chart. Source: Twitter

According to market analyst Michaël van de Poppe, “#Bitcoin broke through $29.4K and ran towards the next resistance zone. If we hold $29.4K, we’ll be good towards $32.8K. Finally.”

One interesting thing to note at these price levels is that while the predominant sentiment is that of extreme fear, on-chain intelligence firm Santiment pointed out that whale wallets have taken this as an opportunity to accumulate some well-priced BTC.

Bitcoin price vs. supply distribution. Source: Santiment

Santiment said:

“As #Bitcoin continues treading water at $29.6K, the amount of key whale addresses (holding 100 to 1k $BTC) continues rising after the massive dumping from late January. We’ve historically seen a correlation between price & this tier’s address quantity.”

Price could still pull back to $22,500

A macro perspective on how Bitcoin performs following the appearance of a death cross was offered by pseudonymous Twitter user Rekt Capital, who posted the following chart outlining what to expect if the “historical price tendencies relating to the #BTC Death Cross repeat […]”

BTC/USD 1-week chart. Source: Twitter

Rekt Capital said:

“$BTC will breakdown from the Macro Range Low support & continue its drop to complete -43% downside. The -43% mark is confluent with the 200-Week MA at ~$22500.”

Related: Scott Minerd says Bitcoin price will drop to $8K, but technical analysis says otherwise

“A pivotal retest”

The importance of the current price level for Bitcoin was touched upon by economist Caleb Franzen, who posted the following chart looking at the long-term performance of BTC versus its weekly anchored volume-weighted average price (AVWAP), noting that “This is a pivotal retest, similar to the dynamics in March 2022.”

BTC/USD vs AVWAP 1-week chart. Source: Twitter

Franzen said:

“A rebound on the weekly AVWAP from the COVID low could increase bullish probabilities. A breakdown below it would drastically increase bearish probabilities, foreshadowing a retest of the grey range, $13.8k-19.8k.”

The overall cryptocurrency market cap now stands at $1.265 trillion and Bitcoin’s dominance rate is 44.8%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

fUSD stablecoin launch and rumors of Cronje’s return send Fantom (FTM) price higher

FTM price recovers from its May 12 low after the launch of the fUSD stablecoin and the possible return of Andre Cronje.

After a strong 2,000% rally in early 2021, Fantom (FTM) price collapsed alongside multiple altcoins and even though the blockchain has an impressive capability, it has yet to find mass adoption due to the lack of a compelling use case. FTM price hit an all-time high at $3.46, only to collapse to its pre-bull market lows under $0.25 after the failure of the Solidly DeFi project and the departure of developer Andre Cronje.  

Data from Cointelegraph Markets Pro and TradingView shows that since dropping to $0.238, FTM has rallied 119.23% to $0.5216 on May 23.

FTM/USDT 4-hour chart. Source: TradingView

Three reasons for the uptrend in FTM price are the launch of the first native stablecoin on the Fantom network, new protocol upgrades and partnership announcements, which bring new functionality to the network, and speculation that Andre Cronje is working with decentralized finance (DeFi) protocols on Fantom.

Fantom launches its first native stablecoin

The most notable development to occur in the Fantom ecosystem in the past few weeks was the release of fUSD, the first native stablecoin on the network.

The launch of fUSD comes on the heels of the collapse of TerraUSD and looks to capture some of the capital flight from algorithmic stablecoin by offering an over-collateralized alternative.

On May 20, the Fantom Foundation released an update outlining the maximum collateral factor and minting cap for each supported form of collateral. The foundation also set the fUSD staking reward at 11.3%

The update also included details on Fantom liquid staking, setting a global cap of 150 million staked Fantom (sFTM), removing validators for the list of those eligible to mint sFTM and setting a loan-to-value (LTV) ratio of FTM at 90% for the purposes of minting sFTM.

New partnerships improve sentiment for FTM

A handful of recent protocol updates and new partnerships have also helped to bring a boost in momentum to Fantom, including the launch of Snapsync, which allows new nodes to quickly join the network.

With the integration of Snapsync, the time it takes for new nodes to synch could be reduced from 24 to seven hours, helping to enhance network reliability, improve scalability and create a greater degree of decentralization.

Fantom has also announced that it is currently in the process of launching Gitcoin on the Fantom network to simplify the process of obtaining grants to develop in the Fantom ecosystem.

Fantom also partnered with Unmarshal and XP.Network. Unmarshal is a Web3 infrastructure provider that will integrate its indexing services with the Fantom protocol to give developers easy access to organized and granular on-chain data.

Through the partnership with XP.Network, Fantom users will be able to bridge nonfungible tokens (NFTs) between Ethereum (ETH), BNB Smart Chain (BNB), Elrond (EGLD), Aurora (AURORA), Tron (TRX), Avalanche (AVAX) and Velas (VLX).

Related: Crypto remittances must have allure of cash without regulatory constraints — Jeremy Allaire

Did Andre Cronje return?

Another factor, albeit speculative, bringing a boost FTM price is speculation that well-known DeFi developer Andre Cronje could be contributing toward DeFi development on the Fantom network.

The speculation started when Cronje submitted an fUSD optimization proposal that designed to solve a major depegging issue with the stablecoin on May 20 . A Fantom wallet that is believed to belong to Cronje has also added more than 100 million FTM over the past two weeks.

VORTECS™ data from Cointelegraph Markets Pro began to detect a bullish outlook for FTM on May 20, prior to the recent price rise.

The VORTECS™ Score, exclusive to Cointelegraph, is an algorithmic comparison of historical and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.

VORTECS™ Score (green) vs. FTM price. Source: Cointelegraph Markets Pro

As seen in the chart above, the VORTECS™ Score for FTM spiked to a high of 89 on May 20 at the same time as its price began to increase 62.3% over the next three days.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

20% drop in the S&P 500 puts stocks in a bear market, Bitcoin and altcoins follow

Recession fears mount as a 20% decline in the S&P 500 places stock in a bear market, increasing the chance that BTC and altcoins will make new lows.

Whoever coined the phrase “sell in May and go away” had brilliant insight, and the performance of crypto and stock markets over the past three weeks has shown that the expression still rings true.

May 20 has seen a pan selloff across all asset classes, leaving traders with few options to escape the carnage as inflation concerns and rising interest rates continue to dominate the headlines.

Data from Cointelegraph Markets Pro and TradingView shows that the price of Bitcoin (BTC) taking on water below $29,000, and traders worry that losing this level will ensure a visit to the low $20,000s over the coming week.

BTC/USDT 1-day chart. Source: TradingView

As reported by Cointelegraph, some analysts warn that BTC could possibly decline to $22,700 based on its historical price performance following a death cross.

Further evidence of muted expectations from traders can be found in the put/call ratio for BTC open interest, which hit a 12-month high of 0.72 on May 18, according to the cryptocurrency research firm Delphi Digital.

Bitcoin put/call ratio on open interest and volume. Source: Delphi Digital

Delphi Digital said:

“A high put/call ratio indicates that investors are speculating whether Bitcoin will continue to sell off, or it could mean investors are hedging their portfolios against a downward move.”

Stocks enter bear market territory

May 20 brought more pain to the traditional markets as the S&P 500 fell another 1.62%, marking a more than 20% decline from its January 2022 all-time high and further stoking recession fears. If the index manages to close the day down 20% from the all-time-high, that would officially put the benchmark index in bear market territory.

Performance of the major indices on May 20. Source: Yahoo Finance

The Nasdaq Composite and Dow have also seen significant losses amid the widespread weakness, with the Nasdaq losing 275 points for a 2.42% loss, while the Dow has fallen 362 points, marking a decline of 1.28%.

Related: Crypto veterans extend a helping hand to bear market newbies

What’s bad for BTC is even worse for altcoins

Daily cryptocurrency market performance. Source: Coin360

Altcoins also sold off sharply as BTC, Ether (ETH) and stocks pulled back, reversing the gains seen earlier on the day. 

The few bright spots were Ellipsis (EPS), Persistence (XPRT) and 0x (ZRX), which gained 30%, 13.92% and 12.34%, respectively.

The overall cryptocurrency market cap now stands at $1.234 trillion and Bitcoin’s dominance rate is 44.6%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Bearish head and shoulders pattern forces Ethereum traders to re-adjust their price targets

Traders say Ethereum needs a monthly close above $2,250 to regain bullish momentum, but a bearish technical analysis pattern on the weekly timeframe threatens to push ETH price to new lows first.

Crypto markets remain volatile and a handful of seasoned traders believe that the bearish trend will continue as long as stock markets are chasing new lows.

Most investors would agree that crypto is now in a bear market and the current price action for Bitcoin (BTC) and Ethereum (ETH) suggests that capitulation and consolidation are a ways away.

Data from Cointelegraph Markets Pro and TradingView shows that Ether still struggles to reclaim the $2,000 level as support and this zone has been a notable support and resistance since February 2021.

ETH/USDT 1-day chart. Source: TradingView

Ether needs a monthly close above $2,250

Insight into the major support level Ether needs to clear by the monthly close to regain a bullish outlook was touched on by market analyst and pseudonymous Twitter user Rekt Capital, who posted the following chart indicating the area near $2,269 is a key level.

ETH/USD 3-day chart. Source: Twitter

Rekt Capital said,

“ETH is climbing closer and closer towards the key ~$2,250 level. The main question is whether that monthly level will flip into new resistance once reached.”

Traders target $1,650

The possibility of a breakdown from the current support level was outlined in the following chart posted by crypto trader and pseudonymous Twitter user Crypto Tony, who is “expecting another drop further into the OB” where they are looking to have some orders filled.

ETH/USDT 3-day chart. Source: Twitter

Crypto Tony said,

“This move will be needed to engineer liquidity to propel us into the corrective wave. From there we see how it goes.”

Related: ‘Huge testing milestone’ for Ethereum: Ropsten testnet Merge set for June 8

Ether’s head and shoulders structure is complete

A potentially bearish sign appeared with the completion of a head and shoulders pattern on the weekly chart, a point highlighted in the following chart posted by CryptoCharts.

ETH/USD 1-week chart. Source: Twitter

CryptoCharts said,

“With the recent sideways crypto market, we can clearly spot it out as if it’s a bounce or a breakout on the support highlighted. Here on the short-term timeframe, I will be keeping an eye closely to spot the breakout, or reversal breakout on the current support will lead the price towards the next support formed close to $1,300. Any bounce back will be continuing to rise toward $2,450.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Contrarian Bitcoin investors identify buy zones even as extreme fear grips the market

A popular BTC price metric points to “extreme fear” in the market, but contrarian investors say multiple on-chain metrics suggest Bitcoin is in buy territory.

Bitcoin (BTC) support at the $30,000 level has proven to be quite resilient amid the turmoil of the past two weeks, with many tokens in the top 100 now showing signs of consolidation after prices bounced off their recent lows.

Fear & Greed Index. Source: Alternative.me

During high volatility and sell-offs, it’s difficult to take a contrarian view, and traders might consider putting some distance from all the noise and negative news flow to focus on their core convictions and reason for originally investing in Bitcoin.

Several data points suggest that Bitcoin could be approaching a bottom which is expected to be followed by a lengthy period of consolidation. Let’s take a look at what experts are saying.

BTC may have already reached “max pain”

The spike in realized losses by Bitcoin holders was touched on by Root, a pseudonymous analyst, who tweeted the following chart and said realized losses are “reaching bear market highs.”

Bitcoin realized profit/loss. Source: Twitter

While previous bear markets have seen a greater level of realized losses than are currently present, they also suggest that the pain could soon begin to subside, which would allow Bitcoin to begin the slow path to recovery.

Analysts have also pointed out that “Bitcoin’s RSI is now entering a period that has historically preceded outsized returns on investment for long-term investors.”

BTC/USD RSI. Source: Twitter

According to Rekt Capital:

“Previous reversals from this area include January 2015, December 2018, and March 2020. All bear market bottoms.”

Strong hands hold firm

Additional on-chain evidence that Bitcoin may soon see a revival was provided by Jurrien Timmer, Global Director of Macro at Fidelity. According to the Bitcoin Dormancy Flow, a metric that displays the dormancy flow for Bitcoin that “roughly speaking is a measure of strong vs. weak hands.”

Bitcoin dormancy flow. Source: Twitter

Timmer said:

“The entity-adjusted dormancy flow from Glassnode is now at the lowest level since the 2014 and 2018 lows.”

One metric that suggests that the weak hands may be nearing capitulation is the Advanced NVT signal, which looks at the Network Value to Transactions Ratio (NVT) and includes standard deviation (SD) bands to identify when Bitcoin is overbought or oversold.

Advanced NVT signal. Source: LookIntoBitcoin

As shown on the chart above, the advanced NVT signal, which is highlighted in light blue, is now more than 1.2 standard deviations below the mean, suggesting that Bitcoin is currently oversold.

Previous instances of the NVT signal falling below the -1.2 SD level have been followed by increases in the price of BTC, although it can sometimes take several months to manifest.

Related: Bitcoin price predictions abound as traders focus on the next BTC halving cycle

Hash rate hits a new all-time high

Aside from complex on-chain metrics, there are several other factors that suggest Bitcoin could see a boost in momentum in the near future.

Data from Glassnode shows that the hashrate for the Bitcoin network is now at an all-time high, indicating that there has been a substantial increase in investments in mining infrastructure with the most growth happening in the United States.

Bitcoin mean hash rate vs. BTC price. Source: Glassnode

Based on the chart above, the price of BTC has historically trended higher alongside increases in the mean hash rate, suggesting that BTC could soon embark on an uptrend.

One final bit of hope can be found looking at the Google Trends data for Bitcoin, which notes a spike in search interest following the recent market downturn.

Interest in searching for Bitcoin over time. Source: Google Trends

Previous spikes in Google search interest have largely coincided with an increase in the price of Bitcoin, so it’s possible that BTC could at least see a relief bounce in the near future if sidelined investors see this as an opportunity to scoop up some Satoshis at a discount.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Socios fan tokens rally 40%+ after Chiliz rolls out mainnet upgrade and token burn plan

A new exchange listing, mainnet launch and competitive token burn mechanism led to a sharp rally in Socios fan tokens.

In times of high stress and market turmoil, sports entertainment has served as a valuable escape for people around the world as they get a chance to root for their favorite players and teams while briefly forgetting about the worries of the world. 

Amid the ongoing market volatility and falling crypto prices, sports fans have cause to rejoice as multiple fan tokens have bucked the downtrend on May 18 to post 40% plus gains.

Top 7 coins with the highest 24-hour price change. Source: Cointelegraph Markets Pro

Here’s a look at the recent developments that have helped propel Paris Saint-Germain (PSG), Juventus (JUV), FC Barcelona (BAR) and other fan tokens to the top of the charts on May 18.

Chiliz Testnet Phase 2

The biggest driver of momentum for fan tokens appears to be coming from new developments on the Chiliz protocol, which operates Socios, a blockchain-based sports entertainment platform.

On May 17, Chiliz revealed the launch of Jalapeno, the second phase of its Scoville testnet, which is part of the broader launch of the Chiliz mainnet.

A few of the new features to be tested in Phase 2 include the launch of PepperSwap, which will provide a decentralized exchange and fan token test surveys, which allow token holders to begin participating in surveys and governance votes on the protocol.

Eventually, users will be able to interact with the community of specific fan tokens and vote on developments that they would like to see for that club through fan token surveys, which is one of the features in which many investors were initially interested.

Fan tokens list at a new exchange

A new listing at BitPanda could be another reason why fan tokens rallied on May 18.

According to BitPanda’s Twitter, at least seven fan tokens listed on May 18.

Related: Exploiting sports fans through NFTs won’t lead to a W

Token burns reduce supply

Another factor providing a boost to fan token prices is the Chiliz Head2Head burn competition which burns a portion of the fan token circulating supply based on the results of live matches between clubs.

Based on this design, the Head2Head burn mechanism will affect the tokenomics of a project over time by helping to reduce the circulating supply of tokens, which has the potential to result in a price increase if demand stays elevated.

It also provides a way to see the performance of a team reflected in its token supply, with better performing teams seeing more of their token supply burned. If the Head2Head burn process proves effective, it could potentially increase the value of certain teams due to the reduced circulating supply.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Bitcoin is discounted near its ‘realized’ price, but analysts say there’s room for deep downside

On-chain data suggests Bitcoin price is discounted, but analysts caution against expecting a rapid recovery.

There are early signs of the “dust settling” in the crypto market now that investors believe that the worst of the Terra (LUNA) collapse looks to be over. Viewing Bitcoin’s chart indicates that while the fallout was widespread and quite devastating for altcoins, BItcoin (BTC) has actually held up fairly well. 

Even with the May 12 drop to $26,697 marking the lowest price level since 2020 multiple metrics suggest that the current levels could represent a good entry to BTC. 

BTC/USDT 1-day chart. Source: TradingView

The pullback to this level is notable in that it was a retest of Bitcoin’s 200-week exponential moving average (EMA) at $26,990. According to cryptocurrency research firm Delphi Digital, this metric has historically “served as a key area for prior price bottoms.”

BTC/USD vs. 200-week EMA vs. 14-week RSI. Source: Delphi Digital

And it wasn’t just Bitcoin that had a rough day on May 12. The stablecoin market also saw its highest level of volatility and deviation from the dollar peg since the start of the Terra saga, with Tether (USDT) experiencing the largest deviation among the major stablecoin projects as shown in the chart below from blockchain data provider Glassnode.

Stablecoin prices during Terra’s meltdown. Source: Glassnode

All four of the top stablecoins by market cap have managed to return to within $0.001 of their dollar peg, but the confidence of crypto holders in their ability to hold has definitely been shaken by the events of the past two weeks.

Related: Do Kwon summoned to parliamentary hearing following UST and LUNA crash

Bitcoin approaches its realized price

As a result of the market pullback, the price of Bitcoin is now trading the closest it has been to its realized price since 2020.

Bitcoin realized price. Source: Glassnode

According to Glassnode, the realized price has historically “provided sound support during bear markets and has provided signals of market bottom formation when the market price trades below it.”

Previous bear markets saw the price of BTC trade below its realized price for extended periods of time, but the amount of time has actually decreased every cycle with Bitcoin only spending seven days below its realized price during the bear market of 2019–2020.

Days Bitcoin spent below its realized price during previous bear markets. Source: Glassnode

It remains to be seen if BTC will fall below the realized price should the current bear market conditions persist, and if so, how long it will last.

On-chain data shows that many crypto holders couldn’t resist the temptation of acquiring Bitcoin below $30,000, resulting in a spike in accumulation beginning on May 12 and continuing through May 15, but some analysts caution against taking this as a sign that a rapid recovery will occur from here.

This sentiment was echoed by Delphi Digital, which noted that “the longer we see price build in these areas, further continuation becomes more likely.”

Delphi Digital said,

“In the event this happens, look for the following levels: 1) Weekly structure and volume structure support at $22,000–$24,000; 2) 2017 all-time high retests of $19,000–$20,000.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Bitcoin price could bounce to $35K, but analysts say don’t expect a ‘V-shaped recovery’

Daily closes above $30,000 could be a sign that BTC price is ready to consolidate, but traders warn against “generational bottoms” and “V-shaped” recoveries.

Altcoins saw a relief bounce on May 13 as the initial panic sparked by Bitcoin’s sell-off TerraUSD (UST) collapse and multiple stablecoins losing their dollar peg begins to decrease. Risk-loving traders look to scoop up assets trading at yearly lows.

Daily cryptocurrency market performance. Source: Coin360

Despite the significant correction that occurred over the past week, Bitcoin (BTC) bulls have managed to claw their way back to the $30,000 zone, a level that has been defended multiple times during the 2021 bull market.

Here’s a look at what several analysts have to say about the outlook for Bitcoin moving forward as the price attempts to recover in the face of multiple headwinds.

Is a short squeeze pending?

Insight into the minds of derivatives traders was provided by cryptocurrency analytics platform Coinalyze, which assessed Bitcoin’s long to short positions for BTC/USD perpetual contracts on ByBit.

BTC/USD perp 1-day chart vs. long/short BTC/USD accounts ratio. Source: Twitter

As shown in the lower half of the chart above, the interest in shorts, which is represented in red, has surged during the recent market downturn, indicating that derivatives traders expected more downside in the short term.

“The sentiment was very negative over the last few days, as seen in ByBit long/short ratio and funding rate. A short squeeze/bounce is expected,” Coinalyze founder Gabriel Dodan told Cointelegraph in private comments.

A short-term breakout to $35K is expected

Bitcoin’s dip to $26,716 on May 12 was notable in that it broke below the May 2021 low at $28,600, “which was seen as the last man standing for BTC,” according to David Lifchitz, managing partner and chief investment officer at ExoAlpha.

In Lifchitz’s view, the bounce seen on May 13 was to be expected, as “a lot of bad news had been flushed out” while the “panic move from the UST fiasco has already occurred.”

Bitcoin sitting at the May 2021 lows “seems like a good entry point here with a tight stop should the purge continue,” according to Lifchitz, but traders shouldn’t expect a return to $60,000 to happen overnight and instead should set a more modest short term target of $35,000.

Lifchitz said:

“Long at $28.5K/Stop at $26.5K/Profit target at $34.5K = $6K upside/$2K downside = 3/1 win/loss ratio and from an investment point of view, it looks compelling to me.”

Related: Buy the dip, or wait for max pain? Analysts debate whether Bitcoin price has bottomed

A V-shaped recovery is unlikely

Insight into what it would take for Bitcoin to regain its bullish momentum was provided by market analyst and pseudonymous Twitter user Rekt Capital, who posted the following chart noting that BTC “needs to keep $28,600 as support for the price to challenge $32,000,” while a “weekly close below the green would be bearish.”

BTC/USD 1-week chart. Source: Twitter

While many optimistic traders are hoping for a rapid recovery from this latest downturn, Rekt Capital warned that “by standards of history, a sharp V-Shaped recovery to mark out a generational bottom is less likely.”

The analyst said:

“Many expect one as the previous March 2020 BTC bear market bottom was very volatile. But macro price history suggests extended ranges are more likely.”

The overall cryptocurrency market cap now stands at $1.287 trillion and Bitcoin’s dominance rate is 44.4%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Altcoins stage a relief rally while Bitcoin traders decide whether to buy the dip

Stocks and altcoin prices bounced as the sell-off in BTC took a pause, but analysts continue to warn that further downside could occur shortly.

The similarity in price action between the crypto and traditional financial markets remains quite strong on May 10 as traders enjoyed a relief bounce across asset classes following the May 9 rout, which saw Bitcoin (BTC) briefly dip to $29,730.

Market downturns typically translate to heavier losses in altcoins due to a variety of factors, including thinly traded assets and low liquidity, but this also translates into larger bounces once a recovery ensues.

Daily cryptocurrency market performance. Source: Coin360

Several projects notched double-digit gains on May 10, including a 15.75% gain for Maker (MKR), the protocol responsible for issuing the DAI (DAI) stablecoin, which likely benefited from the fallout from Terra (LUNA) and its TerraUSD (UST) stablecoin.

Other notable gainers include Persistence (XPRT) and its liquid staking token pSTAKE (PSTAKE), which experienced gains of 16.4% and 39.8% after Binance Labs revealed a strategic investment in the liquid staking platform. Polygon (MATIC) also bounced back with a 14.59% gain.

Correlation with traditional markets remains

Despite the widely held belief that the crypto market would act as a hedge to TradFi volatility, the correlation between Bitcoin and the stock market has remained high in 2022.

If anything, the volatility usually associated with the cryptocurrency market has begun to rear its ugly head in traditional markets, as evidenced by the price action for the Dow Jones Industrial Average on May 10, which rose more than 500 points only to give back at the time of writing.

The Nasdaq and S&P 500 have fared a little better, notching gains of 0.9% and 1.92%, respectively.

Further evidence to support a correlation between crypto and traditional markets was provided by Bitcoin analyst Willy Woo, who posted the following chart noting that “Fundamentals [are] taking a back seat to fear driven trading.”

BTC/USD 1-week chart vs. SPX 1-week chart. Source: Twitter

Willy Woo said,

“What I do think is we are not trading BTC, we are trading macro and equities. Right pane is SPX support, which will determine BTC directionality, left pane is the equivalent BTC support.”

Related: Michael Saylor assuages investors after market slumps hurts $MSTR, $BTC

The S&P 500 could drop much further

While May 10’s relief rally sent crypto and stock prices higher, market analyst Caleb Franzen posted the following chart warning about a bearish head and shoulders formation on the S&P 500 chart that could result in the loss of another 500 points.

SPX/USD 1-day chart. Source: Twitter

Franzen said,

“Hard to pick downside targets after my $4,000 call got hit, but I think the MOST LIKELY support zone is down around $3,530–$3,590. This is the white resistance range from September–October 2020.”

The overall cryptocurrency market cap now stands at $1.444 trillion and Bitcoin’s dominance rate is 41.5%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.