News
31
May
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Market overview 5/31: Prices are finally going up!

Bitcoin’s price has finally moved up after a long downfall. Have we seen the bottom of the bear market? Cardano’s ADA token is the best performer of blue-chip coins. The DeFi sector is still recovering from Terra’s collapse.

It was another red week for Bitcoin

Bitcoin’s price is $31.500 at the time of writing this article. The price was about $2000 lower a week ago. Bitcoin is finally moving up! The first days of this week have been surprisingly strong when considering the horrible downtrend we have witnessed in the past two months.

Let’s look at Bitcoin’s price through weekly candles again. The blue trend line is the important 200-week moving average.

btc-0531

As you can see, Bitcoin printed yet another red weekly candle. The price has now fallen for nine consecutive weeks. This has never taken place before in Bitcoin’s history. The eight-week losing run was also a new record a week ago.

Investors were a bit surprised by yet another red candle. Bitcoin’s price has been heavily correlated with the stock market for a long time now, but this correlation was broken last week. Stocks finished the week very strongly while Bitcoin’s price went down.

The reason for Bitcoin’s decoupling from the stock market was probably the fact that Friday was when options expire. Bitcoin’s price has fallen many times around the options expiry date.

Bitcoin began moving higher already on Saturday and Sunday. On Monday, we saw a really nice $2000 bounce. It looks like Bitcoin followed the stock market with a small delay.

The Monday 5th of May was a holiday in the United States. Hence, the stock market was closed. It looks like the U.S. stock market opens to a small downtrend on Tuesday.

The picture below shows the development of the S&P 500 index from last week. This is the run Bitcoin did not participate in.

sp500

Positive price movements didn’t come as a big surprise. This is what we wrote a week ago:

We can expect some positive movements in the short term. Markets have gone down so long now that it’s unlikely we still see several negative weeks. Valuations have fallen so much that more and more investors are willing to throw in money again.

Is it time for a long bull market now? For example, the market had a nice rally in March where prices went up tens of percentages for several weeks. It’s too early to analyze the strength of the current uptrend.

Many analysts are marking the early May crash as the bottom of this bear market. Even if many technical indicators support this theory, we must remember that cryptos are still following the stock markets.

The S&P 500 index is only down 13.3 % year-to-date. Even if Nasdaq has suffered a lot, it is only down 24.3 % as well. Unfortunately, there is lots of room for the stock market to find new lows.

The market needs positive signals from the central banks before a new bull run can begin. All negative macro factors are still in place. For example, the ECB is only beginning to raise interest rates in July. Fed is also expected to keep on tightening in the coming months. Everyone is also hoping for inflation to show more signs of peaking.

We recommend investors remain cautious and conservative. Remember, that there are often strong rallies during bear markets. It doesn’t mean the bottom is found. Regardless, it’s nice to finally see some positive price movements! Let’s hope we don’t have to witness a 10th red weekly candle in a row.

Cardano was the best performer of top cryptocurrencies

Now it’s time to look at the broader crypto market. Before we do that, it’s important to notice Bitcoin’s dominance has gone up about two percentage points since last week. This usually means tough times for altcoins.

Below is a list of the top 15 cryptocurrencies and their performance against Bitcoin.

alts-0531

The weekly (7d) column is full of red. There is just one coin that has performed better than Bitcoin: Cardano’s ADA token. Note that WBTC is just Wrapped Bitcoin meaning a bitcoin transferred to the Ethereum blockchain.

The reason for Bitcoin’s dominance boost is probably Ethereum’s poor performance. The number two crypto crashed hard against Bitcoin on Thursday. The reason was a seven-block reorg that took place in the Beacon Chain. This was the time when Bitcoin’s dominance shot up.

Beacon Chain is the blockchain of the upcoming Ethereum 2.0. It runs on Proof of Stake consensus. This insignificant event spooked investors to sell Ether, which in turn pushed other altcoins down.

The best performer was Cardano with a 29% price jump in USD terms.

There is no major news about Cardano out there. We think the move is because of technical price levels and increased DeFi activity. There was also a new USDC bridge launched between Ethereum and Cardano.

There is one token in the top 100 list that has done even better than Cardano. That is Waves. This is a smart contract platform we mentioned several times earlier this year. Waves made big moves for no obvious reasons. Now it’s pumping again. We reckon this is another short-term pump for the token.

The DeFi sector is still suffering from Terra’s crash

Now it’s time to move to the DeFi sector.

The graph below shows that the DeFi market is yet to recover from Terra’s collapse in early May. It caused lots of uncertainty and chaos in other DeFi apps too. The TVL number hasn’t really moved anywhere from last week. We are still almost 50% down from ATH.

All graphs and lists in this article are screenshots from defillama.com. Visit that site for up-to-date stats.

defi-0531

Terra’s collapse shaped the top 10 protocol list quite a bit. Though, we haven’t seen any major moves since last week. Aave has overtaken Curve and moved to second place. The difference between these popular dapps is only marginal.

We have also seen Compound and PancakeSwap swap positions at 7th and 8th place. The TVL difference between these two dapps is also very small.

defi-prot-0531

At least most of the DeFi apps have seen positive TVL growth in the past seven days. Unfortunately, it’s mostly just single-digit percentages. When we look at the one-month column it looks really red. Every dapp except JustLend is down in liquidity.

There was fresh drama in the Terra network today. A popular Mirror app was in big trouble due to a new bug that was draining its funds. It was revealed just a few days earlier that there was a major vulnerability in the Mirror app that went unnoticed for six months. The hacker managed to drain $90 million.

We mentioned in our news summary how Terra launched its new blockchain “Terra 2.0”. Time will tell if Terra DeFi apps will gain any popularity. It looks like BNB Chain is trying to lure many developers to its ecosystem. Both BNB Chain and Terra are built with Cosmos SDK.

Next, let’s look at the blockchain rankings.

defi-chains-0531

There is just one change from the previous week: Cronos and Fantom have switched places at 7th and 8th position. The difference in TVL is marginal.

Tron was the best performed last week. It is again standing out from the crowd with Waves. Tron has recently launched its own algorithmic stablecoin called USDD. Tron tries to grow exactly as Terra did by offering a 30% APY for USDD staking.

The previously mentioned Cardano has still only 156 million in TVL. It would need to grow 10x to reach the top 10.

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