Crypto week: Market is on Halt

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.