Market Wrap: Crypto Sell-Off Pauses as Volatility Fades; Altcoins Outperform

Bitcoin (BTC) and other cryptos stabilized on Tuesday amid lower volatility. Options traders remain uncertain as demand for puts began to outweigh demand for calls. Stocks were also mixed, while gold traded higher.

Most cryptocurrencies stabilized on Tuesday amid a slowdown in volatility.

Sharp price swings have been the norm this year as macroeconomic and geopolitical uncertainty kept traders on edge. A combination of war, rising interest rates, inflation and slower economic growth have caused investors to reduce their exposure to risk, particularly during the first half of the month.

For example, price action over the past two weeks has resembled pullbacks that occurred in the first half of February and March. That could point to a brief recovery phase in cryptos and stocks, barring any unforeseen circumstances.

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Most alternative cryptocurrencies (altcoins) outperformed bitcoin on Tuesday, suggesting a greater appetite for risk among traders. Shiba Inu’s SHIB token rose by 12% over the past 24 hours, compared with a 2% decline in BTC. NEAR, the native token of the Near protocol, was up by 3%, while Convex Finance’s CVX token was down by 6% over the past 24 hours.

Stocks were mostly flat on Tuesday as the U.S. 10-year Treasury yield declined. Gold, a traditional safe haven, traded higher, which could point to underlying uncertainty in the market.

In other news, the monthly U.S. Consumer Price Index came in slightly higher than expected on Tuesday, at 8.5%, a fresh four-decade high. But some analysts and economists are now predicting the report might mark the peak of the current inflation cycle.

Latest prices

Bitcoin (BTC): $39341, −1.63%

Ether (ETH): $2975, −1.05%

S&P 500 daily close: $4397, −0.34%

Gold: $1972 per troy ounce, +1.42%

Ten-year Treasury yield daily close: 2.73%

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.

Volatility patterns

The rise in bitcoin’s volatility over the past few days was short-lived, which could point to a short-term stabilization in BTC’s spot price.

“BTC volatility markets are not showing too much panic,” QCP Capital, a crypto trading firm, wrote in a Telegram announcement. The firm noted that near-term volatility ticked higher over the past day, while long-term volatility barely budged.

“One distinct pattern that we’ve noticed is that front-end volatility has been moving inversely with the BTC spot price,” QCP wrote. “This means when spot is lower, volatility is higher, and when spot is higher, volatility is lower.”

Lately, traders have been demanding more call options than put options, which creates an imbalance. “As a result, when prices go higher, there is much less panic or fear in the market than when prices collapse,” QCP wrote. That has forced some traders to scramble in search of put options to protect themselves on the downside.

Bitcoin implied volatility vs. spot price (Skew)

The chart below shows a slight uptick in the bitcoin put/call ratio, which indicates greater uncertainty among market participants. The ratio has trended lower so far this year, although a turnaround could point to higher volatility in crypto prices.

Currently, the options market is placing a 62% chance that BTC will trade above $36,000 in May, which is near the bottom of the cryptocurrency’s two-month price range.

Bitcoin put/call ratio (Skew)

Altcoin roundup

  • Ichi Tokens Plunged 90%: Ichi’s ICHI governance tokens have plunged some 80% in the past 24 hours after a series of cascading liquidations in its pool on yield-generating platform Rari, data shows. “The Ichi Fuse Pool (#136) is currently experiencing bad debt due to cascading liquidations,” Rari said in a tweet late Monday.

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