Crypto Weekly Recap: Market Correction Fails to Shake Bitcoin Bulls
Bitcoin (BTC) and the broader cryptocurrency market experienced a sharp correction on Thursday, as the majors pulled back from overbought levels following weeks of steady accumulation. Despite incurring heavy losses, bitcoin still managed to secure another weekly gain, a sign that the bulls were still firmly in control.
Altcoins and tokens didn’t fair nearly as well, with most of the top coins seeing sizable losses. This allowed bitcoin to secure 52% of the total market capitalization, the highest ‘dominance rate’ since early March. Of course, the sharp and sudden drop in altcoin values needs to be taken into proper context, as these same assets surged over the previous two weeks, with the likes of Litecoin (LTC), Binance Coin (BNB), EOS and some of the major small caps continuing to show unique price independence relative to bitcoin.
This leads us to conclude that ‘crypto spring’ is still very much in effect. It remains to be seen how the market will respond to the latest drop in values and whether investors will capitalize on this buy-on-the-dip opportunity.
Last week’s crypto market recap – Crypto Spring is Finally Here: Mystery Order Sparks Massive Bitcoin Rally as Altcoins Follow Suit.
Bitcoin: Uptrend Still in Effect
The bitcoin price peaked north of $5,470 this week, the highest since mid-November and confirming once again a bearish-to-bullish trend reversal. Technically, bitcoin’s price is approaching another key milestone – namely, a bullish crossover of the 20-day and 200-day simple moving averages (SMAs). A similar crossover between the 50-day and 200-day MAs was confirmed earlier this month.
If history repeats itself, a crossover between the 20-day and 200-day SMAs could ignite a multi-year rally for bitcoin like the one we saw between October 2015 and December 2017. A sharp decline in short positions and renewed interest among retail traders suggest that such a move isn’t out of the question. Since the start of the year, net shorts on BTC/USD have fallen more than 40%. Read more: Bitcoin Eyes Another Major Milestone as Technical, Fundamental Forces Unite.
At press time, bitcoin was trading north of $5,120 on Bitfinex. Aggregate data from CoinMarketCap show an average price of $5,088 for a weekly gain of 1.9%.
Altcoins Face Heavy Correction
Bitcoin diverged sharply from the broader market this week, as altcoins and tokens suffered an even larger pullback during the aforementioned Thursday session. Coins not named bitcoin lost a combined $10 billion in market capitalization during the selloff, pushing most of the majors into negative territory for the week.
In percentage terms, bitcoin SV (BSV) and Neo (NEO) suffered the biggest losses. Each coin shed more than 12%. XRP lost more than 9% to trade right around the $0.33 mark. Litecoin pulled back to the $80 range, which represents a weekly drop of more than 8%.
After more than doubling in price over the past month, bitcoin cash (BCH) experienced a modest pullback, falling 1.4% to $287.00. Binance Coin, another 2019 top performer, declined 6.6% to fall just below $18.00.
The picture wasn’t entirely negative for altcoins. Ethereum (ETH) registered modest gains for the week, as did EOS. Ethereum Classic (ETC) was the biggest gainer, rallying more than 11%.
EOS Gets Coinbase Treatment
EOS managed to avoid the worst of the market downtrend this week thanks in large part to a Coinbase listing announcement. On Monday, the San Francisco-based exchange announced it has extended support for EOS on its Coinbase Pro platform and that trading will begin once sufficient liquidity has been established.
Once EOS goes live, traders will be able to access the following pairs: EOS/USD, EOS/EUR and EOS/BTC.
In addition to EOS, Coinbase Pro also announced the listing of Maker (MKR) and Augur (REP).
More on this story – EOS Price Analysis: EOS Leads Altcoin Resurgence after Coinbase Listing Announcement.
Crypto as a Hedge?
In the face of a slowing global economy, declining corporate profitability and geopolitical risks, bitcoin offers unique store-of-value characteristics that could help investors through the next major financial crisis. Bitcoin accomplishes this through a unique feature called non-correlation. Basically, BTC trades independently of the financial markets with very few exceptions. This means its price trajectory doesn’t depend on stocks, bonds, monetary policy or economic growth.
Bitcoin’s status as a non-correlated asset was recently brought to light after the International Monetary Fund (IMF) once again downgraded its global economic outlook. This time, the Washington-based lending institution cut its global growth forecast to 3.3% in 2019. That would mark the biggest slowdown in global growth since the 2009 financial crisis.
It remains to be seen whether investors will use this as an opportunity to test bitcoin’s store-of-value characteristics. One thing is certain, though: BTC has outperformed all other major asset classes this year and looks poised to continue that show of dominance for the rest of 2019.
The Week Ahead
Since bottoming in December, the cryptocurrency market has recovered more than $70 billion in lost value. Despite the late-week pullback, coins continue to exhibit bullish bias. The shift in investor sentiment, coupled with the sharp drop in short positions on assets like bitcoin and continued growth in retail interest are clear signs that ‘crypto spring’ is in full swing.
Of course, in crypto land, things can change very quickly. Investors should continue to monitor fundamental developments in the market, as well as the technical charts. Bitcoin short positions are also a good proxy for where the market is headed in the short term. Above all, investors should continue to balance short-term volatility with long-term prospects and not let the former influence the latter too much.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.