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.

Share:

Share on facebook
Facebook
Share on twitter
Twitter
Share on pinterest
Pinterest
Share on linkedin
LinkedIn
On Key

Related Posts

Just In: Bitcoin Maximalist Jack Dorsey Left Twitter Board, Here’s Why

In what could turn out to be a significant milestone of crypto Twitter in the long term, Jack Dorsey on Wednesday left the social media giant. This comes amid Elon Musk’s recent proposal for Twitter purchase. Dorsey Left Twitter Dorsey stepped down from his role as one of Twitter’s board of directors during the company’s

Just-In: Andreessen Horowitz Launches $4.5 Billion Crypto Fund Amid Market Crash

Silicon Valley-based venture capital firm, Andreessen Horowitz, has made public its plan to back crypto and blockchain companies with a $4.5 billion fund, as revealed by CNBC.  Andreessen Horowitz Bullish on Crypto Jointly established by Marc Andreessen and Ben Horowitz on July 6, 2009, Andreessen Horowitz majors in channeling investments into start-ups and growth firms,

Why Banning Crypto Mining Is Almost Impossible?

Jarran Mellerud, a crypto researcher and analyst, has given reasons why banning crypto mining might not be feasible, using China’s failed attempt at banning the mining operations of the largest digital currency as a case study. China’s Repeated Failure in Banning Crypto Mining In June 2021, China banned Crypto Mining, this has once again proved

US Senator Cruz ‘Incredibly Bullish’ on Bitcoin — Says ‘I Have a Weekly Buy’

U.S. Senator Ted Cruz says he is “incredibly bullish” on bitcoin and purchases the cryptocurrency weekly for his portfolio. Emphasizing that cryptocurrency “will change the world,” the senator said, “Uncontrolled, decentralized currency is terrifying for those who want control of currency.” Senator Ted Cruz ‘Incredibly Bullish’ on Bitcoin, Crypto Senator Ted Cruz (R-TX) discussed bitcoin