Most cryptocurrencies traded higher on Friday as bearish sentiment waned. It appears that short-term buyers have returned from the sidelines, although technical indicators show limited upside from here.
Bitcoin (BTC) returned toward the $30,000 price level and was up by as much as 5% over the past 24 hours. Still, momentum signals remain negative on the charts after BTC’s 17% dip over the past week.
For now, cryptos and stocks are experiencing a relief bounce, which could last for a few more days. Alternative cryptos (altcoins) outperformed on Friday, which reflects a greater appetite for risk among traders. For example, ICP, MANA and DOGE rallied by more than 20% over the past 24 hours.
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Meanwhile, the Terra blockchain resumed activity on Friday following a nine-hour halt. The LUNA token continued to trade below 1 cent at the time the network was halted.
Also, on Friday, the Grayscale Bitcoin Trust’s (GBTC) discount widened to an all-time low of 30.79%. The recent crypto sell-off also may have contributed to a wider GBTC discount. (Grayscale is a CoinDesk sister company.)
●Bitcoin (BTC): $29,980, +5.17%
●Ether (ETH): $2,057, +6.60%
●S&P 500 daily close: $4,024, +2.39%
●Gold: $1,808 per troy ounce, −0.88%
●Ten-year Treasury yield daily close: 2.94%
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.
Fewer crypto traders sought refuge in stablecoins during the recent market sell-off. That suggests investors are starting to exit crypto markets.
The chart below, provided by Glassnode, shows the 30-day change in aggregate stablecoin supply (blue) alongside the contribution by stablecoin USDC (red). Since last May, USDC has been a significant contributor to total stablecoin supply growth. Recently, however, USDC has been the primary stablecoin asset experiencing redemption.
Stablecoin supply contraction signals a degree of net capital outflow from the cryptocurrency industry at large, according to Glassnode. “Overall, there are a number of signals of net weakness in the space, many of which indicate that risk-off sentiment remains the core market position at this time,” Glassnode wrote in a blog post.
Interestingly, Tether’s USDT has seen its supply continue to expand over the same period of USDC outflows. But since the start of April the aggregate stablecoin supply has plateaued.
It remains to be seen if trust in stablecoins will return following Terra’s faulty experiment using algorithms. Some stablecoin issuers have assured market participants that not all stablecoins are the same (some are backed by cash-like instruments, while others try to maintain their value based on an algorithm that balances the stablecoin with a partner token). But recent episodes have exposed instability in the so-called stable corner of the crypto universe.
Limited upside ahead
For now, cryptos could face additional volatility ahead, which could keep some buyers on the sidelines (in stablecoins or cash).
Despite the recent price bounce, bitcoin’s forward returns following a peak-to-trough decline of 55% or more tend to be flat or negative over the following six months, according to Delphi Digital.
LUNA exchange-traded product issuances halted: VanEck, Valour and 21Shares, all of which offer LUNA-related exchanged-traded products (ETP) in Europe, suspended issuing shares, citing the network’s recent issues, which include two complete shutdowns of the purportedly decentralized network. All three products lost close to 100% this week.