BTC prices have
been hanging around without any particular direction for almost a week now. The
stock market is also in the same mode as it has currently hit lows after
significant corrections from May 12. The correlation of stocks and digital
assets has increased dramatically over recent months. If the current downside
trend on stocks continues a rally in the crypto market without any upside
drivers would be highly unlikely.
A pause in
the downward direction was prompted by a slightly improved sentiment as the number
of COVID-19 cases in China dropped significantly, easing fears about supply
chain disruptions, and amid some comments by Federal Reserve (Fed) officials
that the monetary policy may be eased in the United States some time in 2023. The
Fed’s interest rate may top 3.5% by that time, while monetary easing may start
only after inflation is under control. With this said, the exact timing of such changes of the Fed’s
policy is unknown. So, no aggressive buying in the market has been seen.
The
forecast of BTC at $20,000 seems quite realistic, while altcoins may lose up to
60% of their current value. However, the ratio of risk / yield become more
attractive as digital assets’ prices drop. If we consider a return of digital
assets’ prices to their peaks, BTC and ETH may return 130% profit, and other
altcoins like DOT, SOL, SAND may score over 400%. Investing in digital assets
implies that an investor opens long positions for a long-term with extremely
high risks for a possible extraordinary return. Opening long positions close to
the dips the market is approaching seems to be appropriate.
BTC has
made eight red downside weekly candles in a row, which is the first time in its
history. The volume of deals with BTC is rising highlighting a bearish market
when investors are reducing their exposure to risky assets. The indication of
the ETH domination is decreasing more slowly this time, improving Ethereum
token role as a “safe haven” asset.
Market
sentiment considers that uncertainty could continue. Some preference is seen in
put options, as Put/Call ratio increased from 50% to 70% over the last two
weeks. Strike price is between $15,000 and $20,000 for BTC. Such price levels
indicate investors are in defensive mode in order to shelter themselves from a
possible further downside, while no strong buying intentions are recorded.