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(Kitco News) - The cryptocurrency market continued to trade sideways on Tuesday as the ecosystem struggles to gain momentum in the absence of any major positive developments, while the hack of Curve Finance and concerns about how the XRP ruling will stand up to appeals put pressure on altcoins.
Stocks traded mixed amid a flurry of earning reports that showed the outlook for the U.S. economy remains uncertain, which put a damper on the bullish mood that prevailed in equity markets thus far in 2023. At the closing bell, the S&P and Nasdaq finished lower, declining by 0.27% and 0.43%, respectively, while the Dow gained 0.20%.
Data from TradingView shows that Bitcoin (BTC) fell below support at $29,000 in the early hours on Thursday, hitting a low of $28,609 near midday before bulls managed to push it above $29,300 and back into the trading range it has been in since July 24.
BTC/USD Chart by TradingView
The pullback resulted in “August Bitcoin futures prices [hitting] a five-week low,” according to Kitco senior technical analyst Jim Wyckoff, who noted that “Prices are in a downtrend on the daily bar chart, albeit at higher price levels.”
Bitcoin futures 1-day chart. Source: Kitco
“Bulls and bears are on a level overall near-term technical playing field at present, but the bears have some momentum on their side,” Wyckoff said.
The Bitcoin chart shows that the top crypto has traded within a relatively tight range since June 21, and its 5-day volatility rating has now fallen below that of major traditional assets and indices like the Nasdaq, S&P 500, and gold, according to a report published by crypto research firm K33 on Tuesday.
Average 5-day volatility (bitcoin compared to Nasdaq, S&P, DXY and gold. Source: K33
Bitcoin’s 30-day volatility is also near five-year lows and currently sits at a level where it has only spent eight days since January 2019, K33 said. Periods like this have historically been followed by periods of high volatility, they warned.
“My short-term thesis is that the market's volatility pressure is about to climax and that an eruption is near,” said Vetle Lunde, senior analyst at K33. “The tricky job is to build an informed view of when the pressure gets too strong.”
While an as-yet-unknown catalyst could lead to a surge in trading volumes, Lunde said it is often a “purely structural squeeze” that tends to “be the force moving the needle.”
One catalyst that has the potential to revive momentum and volatility in the crypto market is an announcement on the recently filed spot BTC ETFs by some of the largest asset managers in the world, Lunde said.
“I expect postponements of all active filings, at least until the ongoing Grayscale vs. SEC lawsuit reaches its conclusion,” Lunde said. “Thus, I expect the volatility impact of these events to be less potent for the market. Nonetheless, I favor holding significant exposure in BTC and accumulating more aggressively throughout the summer in case of an earlier-than-expected verdict.”
Lunde also noted the negative impact the Curve Finance hack has had on the market over the past two days, as the protocol now faces a higher liquidation risk.
“These liquidations could have dramatic negative spill-over effects on the market, pushing volatility higher,” Lunde said. “These events are hard to predict in advance. Similarly, the Grayscale vs. SEC hearing verdict could occur any time in the coming months, representing a further potential volatility catalyst for the market.”
Despite the near-term concerns, Lunde said he remains bullish on crypto for 2024 as the market prepares for the next Bitcoin halving, ETF developments, and reduced macro constraints.
As for Bitcoin’s price action in the near term, market analyst Rekt Capital posted the following tweet highlighting the importance of holding support above $29,250.
Instead of #BTC Monthly Closing above the ~$29250 level (black)...$BTC printed a Monthly Close marginally below the ~$29250 level
— Rekt Capital (@rektcapital) August 1, 2023
BTC needs to reclaim ~$29250 as support for the blue path to be valid
However, there are some initial signs of the ~$29250 acting as resistance… pic.twitter.com/GFyEckh1Yk
Mixed results in the altcoin market
The top 200 tokens in the altcoin market were evenly split between winners and losers, with most tokens trading within 3% of yesterday’s prices.
Daily cryptocurrency market performance. Source: Coin360
Amp (AMP) was the biggest gainer with an increase of 15.64%, followed by a 7.3% gain for Maker (MKR) and a 6.91% increase for Qtum (QTUM). Everscale (EVER) saw the biggest decline as its price dropped 14.6%, while Bitcoin Gold (BTG) fell 7.37% and Decred (DCR) lost 7.1%.
The overall cryptocurrency market cap now stands at $1.18 trillion, and Bitcoin’s dominance rate is 48.3%.
