Crypto Market: Sustainable Rally or Dead Cat Bounce?
- The market cap of digital assets has dropped by more than $500 billion in the last 7 days.
- However, Friday’s 10% rebound has given crypto supporters a glimpse of optimism.
The crypto market took a major beating in 2022 amid an uncertain global regulatory environment and the geopolitical situation. But, the intensity of the sell-off increased significantly after the Terra fiasco. LUNA, once known as one of the world’s most valuable cryptocurrencies, lost its entire value within a few days. Amid jittery market conditions, investors pulled out billions of dollars from the market. While Bitcoin plunged below $28,000 on Thursday for the first time in almost 12 months, the situation across the altcoin market was even worse.
But, the crypto crash is nothing new for those who held their assets in the market corrections of 2017 and 2020. Throughout its history, the crypto market has emerged as the winner for most of its long-term holders. Is the situation different this time? Well, if we look at the trend today, it seems like the recent sell-off was one of many we have seen before. On Friday, crypto bulls made a strong comeback with a market rally of more than $150 billion. Bitcoin and Ethereum spiked by over 10%, but altcoins Altcoins Altcoin is a term that describes any cryptocurrency that isn’t Bitcoin. Since Bitcoin’s inception there have been countless cryptos launched. Many of these have met varying levels of success, though several have risen to rival Bitcoin itself.Ether, XRP, Stellar, Monero, Ada, and Dash are a few examples of the more popular altcoins. There presently exist over 5,000 altcoins and this number seemingly grows constantly. The paramount altcoins as of May 2020 are Ethereum and Ripple.In terms of structure, altcoins can be different from the Bitcoin network in any number of ways. This is often the primary reason for the existence of altcoins themselves.Why Do So Many Altcoins Exist?While Bitcoin is both innovative and massively influential, it does possess some problems that developers are trying to fix with their own products. Over time there have been developed altcoins that makes faster transactions, while also altcoins that are less volatile, or altcoins that are more private, etc.Altcoins also can have different economic models and their methods of distribution can be different. Moreover, their programming languages can be different, and they can support the development of different kinds of applications. While many altcoins have been built with amazing technology and have amazing potential to change the world, many of them have been created as methods of grabbing quick cash, or even as jokes.However, some of the joke altcoins have still managed to gather a significant number of users and followers. The most prominent example of this trend is DogeCoin, a cryptocurrency inspired by the Doge meme. Additionally, other joke altcoins have also experienced large market cap, such as JesusCoin. Altcoin is a term that describes any cryptocurrency that isn’t Bitcoin. Since Bitcoin’s inception there have been countless cryptos launched. Many of these have met varying levels of success, though several have risen to rival Bitcoin itself.Ether, XRP, Stellar, Monero, Ada, and Dash are a few examples of the more popular altcoins. There presently exist over 5,000 altcoins and this number seemingly grows constantly. The paramount altcoins as of May 2020 are Ethereum and Ripple.In terms of structure, altcoins can be different from the Bitcoin network in any number of ways. This is often the primary reason for the existence of altcoins themselves.Why Do So Many Altcoins Exist?While Bitcoin is both innovative and massively influential, it does possess some problems that developers are trying to fix with their own products. Over time there have been developed altcoins that makes faster transactions, while also altcoins that are less volatile, or altcoins that are more private, etc.Altcoins also can have different economic models and their methods of distribution can be different. Moreover, their programming languages can be different, and they can support the development of different kinds of applications. While many altcoins have been built with amazing technology and have amazing potential to change the world, many of them have been created as methods of grabbing quick cash, or even as jokes.However, some of the joke altcoins have still managed to gather a significant number of users and followers. The most prominent example of this trend is DogeCoin, a cryptocurrency inspired by the Doge meme. Additionally, other joke altcoins have also experienced large market cap, such as JesusCoin. Read this Term jumped by nearly 25%.
Crypto bulls termed the latest rebound as a sustainable rally while critics think that it is nothing more than a dead cat bounce. Leading names in the crypto ecosystem believe that the long-term potential of Bitcoin and other digital currencies is still massive, however, investors must stay away from the market during extremely volatile conditions. “The situation on the market is still tense, therefore, traders should brace themselves for increased volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets. In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets. Read this Term in the coming days,” Farah Mourad, the Senior Analyst at XTB MENA, said.
According to Mourad, the market has stabilized for now, but lately, the crypto assets mimicked the stock market movements, something that has changed in the growing digital asset ecosystem.
LUNA Crisis
The crash of LUNA will be remembered as one of the biggest events in the history of the cryptocurrency market. Farah believes that the LUNA crash jolted the entire market and fueled uncertainty among retail and institutional investors.
“The collapse of Luna ultimately poses no threat to the fundamentals of other projects that have proven their worth, although it may hurt market sentiment at least in the short-term. This is typical of periods of cyclical downturns, during which a sizable portion of investors look for opportunities and choose to accumulate cryptocurrencies in anticipation of another bullish cycle,” Farah added.
A ‘Cautious’ Opportunity
Analysts mentioned that for those who missed the crypto rally, the recent market correction is like a crypto sale. However, it is more like a ‘cautious’ opportunity than going ‘all in’.
"With major blue-chip cryptocurrencies such as BTC and ETH at major support and massively oversold according to their 4H RSI, traders and investors alike will naturally jump in and buy the dip. The markets might have priced in the rate hikes sooner, and we are less likely to see more carnage in the markets. If all goes well, the market should be poised for a rally. However, with Powell's recent comments stating that inflation remains a priority, it does not seem like we are going to get a policy pivot anytime soon. This is why we have to remain cautious,” Whitney Setiawan, the Research Analyst at Bitrue crypto exchange, commented.
The crypto market took a major beating in 2022 amid an uncertain global regulatory environment and the geopolitical situation. But, the intensity of the sell-off increased significantly after the Terra fiasco. LUNA, once known as one of the world’s most valuable cryptocurrencies, lost its entire value within a few days. Amid jittery market conditions, investors pulled out billions of dollars from the market. While Bitcoin plunged below $28,000 on Thursday for the first time in almost 12 months, the situation across the altcoin market was even worse.
But, the crypto crash is nothing new for those who held their assets in the market corrections of 2017 and 2020. Throughout its history, the crypto market has emerged as the winner for most of its long-term holders. Is the situation different this time? Well, if we look at the trend today, it seems like the recent sell-off was one of many we have seen before. On Friday, crypto bulls made a strong comeback with a market rally of more than $150 billion. Bitcoin and Ethereum spiked by over 10%, but altcoins Altcoins Altcoin is a term that describes any cryptocurrency that isn’t Bitcoin. Since Bitcoin’s inception there have been countless cryptos launched. Many of these have met varying levels of success, though several have risen to rival Bitcoin itself.Ether, XRP, Stellar, Monero, Ada, and Dash are a few examples of the more popular altcoins. There presently exist over 5,000 altcoins and this number seemingly grows constantly. The paramount altcoins as of May 2020 are Ethereum and Ripple.In terms of structure, altcoins can be different from the Bitcoin network in any number of ways. This is often the primary reason for the existence of altcoins themselves.Why Do So Many Altcoins Exist?While Bitcoin is both innovative and massively influential, it does possess some problems that developers are trying to fix with their own products. Over time there have been developed altcoins that makes faster transactions, while also altcoins that are less volatile, or altcoins that are more private, etc.Altcoins also can have different economic models and their methods of distribution can be different. Moreover, their programming languages can be different, and they can support the development of different kinds of applications. While many altcoins have been built with amazing technology and have amazing potential to change the world, many of them have been created as methods of grabbing quick cash, or even as jokes.However, some of the joke altcoins have still managed to gather a significant number of users and followers. The most prominent example of this trend is DogeCoin, a cryptocurrency inspired by the Doge meme. Additionally, other joke altcoins have also experienced large market cap, such as JesusCoin. Altcoin is a term that describes any cryptocurrency that isn’t Bitcoin. Since Bitcoin’s inception there have been countless cryptos launched. Many of these have met varying levels of success, though several have risen to rival Bitcoin itself.Ether, XRP, Stellar, Monero, Ada, and Dash are a few examples of the more popular altcoins. There presently exist over 5,000 altcoins and this number seemingly grows constantly. The paramount altcoins as of May 2020 are Ethereum and Ripple.In terms of structure, altcoins can be different from the Bitcoin network in any number of ways. This is often the primary reason for the existence of altcoins themselves.Why Do So Many Altcoins Exist?While Bitcoin is both innovative and massively influential, it does possess some problems that developers are trying to fix with their own products. Over time there have been developed altcoins that makes faster transactions, while also altcoins that are less volatile, or altcoins that are more private, etc.Altcoins also can have different economic models and their methods of distribution can be different. Moreover, their programming languages can be different, and they can support the development of different kinds of applications. While many altcoins have been built with amazing technology and have amazing potential to change the world, many of them have been created as methods of grabbing quick cash, or even as jokes.However, some of the joke altcoins have still managed to gather a significant number of users and followers. The most prominent example of this trend is DogeCoin, a cryptocurrency inspired by the Doge meme. Additionally, other joke altcoins have also experienced large market cap, such as JesusCoin. Read this Term jumped by nearly 25%.
Crypto bulls termed the latest rebound as a sustainable rally while critics think that it is nothing more than a dead cat bounce. Leading names in the crypto ecosystem believe that the long-term potential of Bitcoin and other digital currencies is still massive, however, investors must stay away from the market during extremely volatile conditions. “The situation on the market is still tense, therefore, traders should brace themselves for increased volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets. In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets. Read this Term in the coming days,” Farah Mourad, the Senior Analyst at XTB MENA, said.
According to Mourad, the market has stabilized for now, but lately, the crypto assets mimicked the stock market movements, something that has changed in the growing digital asset ecosystem.
LUNA Crisis
The crash of LUNA will be remembered as one of the biggest events in the history of the cryptocurrency market. Farah believes that the LUNA crash jolted the entire market and fueled uncertainty among retail and institutional investors.
“The collapse of Luna ultimately poses no threat to the fundamentals of other projects that have proven their worth, although it may hurt market sentiment at least in the short-term. This is typical of periods of cyclical downturns, during which a sizable portion of investors look for opportunities and choose to accumulate cryptocurrencies in anticipation of another bullish cycle,” Farah added.
A ‘Cautious’ Opportunity
Analysts mentioned that for those who missed the crypto rally, the recent market correction is like a crypto sale. However, it is more like a ‘cautious’ opportunity than going ‘all in’.
"With major blue-chip cryptocurrencies such as BTC and ETH at major support and massively oversold according to their 4H RSI, traders and investors alike will naturally jump in and buy the dip. The markets might have priced in the rate hikes sooner, and we are less likely to see more carnage in the markets. If all goes well, the market should be poised for a rally. However, with Powell's recent comments stating that inflation remains a priority, it does not seem like we are going to get a policy pivot anytime soon. This is why we have to remain cautious,” Whitney Setiawan, the Research Analyst at Bitrue crypto exchange, commented.