Bitcoin met
its short-term target of $33,000 at the end of last week, but it continued to
plunge 11.6% to $30,000 on May 9 to also meet its mid-term target. Altcoins
plunged even further: Polkadot, Solana, Fantom, and many others lost about 20%
of their market cap. No market setup to reverse the trend has been seen in the
market so far, and it is likely to continue to plunge down further.
A bearish
trend is intact with the possibility of Bitcoin dropping to $20,000. Any drop below
this figure is seen to be unlikely as Bitcoin prices have never dropped below
previous cycle peaks. However, any previous market levels could be broken at any
time. The decline of the Bitcoin would most likely drag other digital assets
down with it. A potential decline of 50-70% for the top-50 altcoins is a
possible scenario.
Digital
assets are greatly affected by the global financial situation with military
conflict in Europe and COVID-19 outbreaks in China. The duration of this
uncertainty is unknown. This nudges investors to move their capital to other
safer assets, like the U.S. Dollar. American equity funds lost around $37
billion last week as investors withdrew their money, making it the largest
single week of outflow since 2018.
Federal
Reserve (Fed) officials are taking their time to calm down markets, as inflation
has become the ultimate task for them to get under control. Nevertheless, there
are some signs that the Fed is not inclined to push harder on monetary
tightening. San Francisco Federal Reserve President Mary Daly said that
inflation will come down to the Fed’s target of 2% in five years. "There's
just too many supply chain bottlenecks, we're already through the first
quarter, China's got COVID we've got the war in Ukraine, so I don't think we
are going to get 2 this year, but I do think we are going to start coming
down," Daly said at the end of April.
So,
following this path, the Fed may smoothen the interest rate hike cycle, easing
pressure on risky assets. However, such a possibility is not seen to carry much
merit.
Recent
sell-offs in the crypto market registered $1.6 billion in coin inflows, which
is the
highest
since October-November 2021. The inflow of cryptocoins into the market is
considered negative as investors are trying to get rid of their digital assets,
while coin outflows is considered positive as investors are moving their
digital assets to cold wallets for storage for a long period of time. Only 60%
of crypto wallets have been profitable this week, and they are down from 70% profitability
last week. Similar figures were registered at the end of 2018, before a
significant drop of 50% was felt in the market.
Another important
factor to consider is that the overall volume of stablecoins decreased by $2.9
billion over the last 30 days. This is a very odd sign because usually the
number of stablecoins in the market constantly increases. The decrease of the number of stablecoins circulating in the market may
be further evidence of capital outflow from the industry. Fundamentally, the
market is seen to be weak now. The appetite for risk has to be much higher in
order for the situation to improve, and that is not possible without improving
global sentiment in the financial market.