The cryptocurrency market appears to be struggling to get any momentum this morning (Monday AEST) after trading sideways in the backdrop of prevailing downtrend and subdued activity over the weekend. (This is in contrast to usual high trading volumes in cryptocurrencies during weekend).
The market is widely believed to be in a correction and retreat phase with near $500 billion worth of crypto’s market capitalization has so far been wiped out after a dizzying rise in March and early April.
All major coins except Ethereum (ETH) are drifting lower this morning.
Bitcoin (BTC) is changing hands at US $48,700 now. Among the other 9 variable-priced digital currencies in the Big 10, Ether (ETH) just under US $2,300 (up from Sunday’s US $2,2,00 level), ripple (XRP) US $1.02, Binance Coin (BNB) US $500, cardano (ADA) US $1.06, ChainLink (Link) US $31.3, Dogecoin (DOGE) US $0.25, Stellar (XLM) $0.41, Vechain (VET) US $0.16 and Litecoin (LTC) US $219.
Overall, market activity over the past two days has been subdued with challenging underlying market conditions.
Subdued activity is also likely linked to the tightened liquidity on crypto exchanges – gearing and leveraging by the traders – they borrow more when prices surge as exchanges are willing to provide but when prices start drop they face the margin requirement to top off their account with cash to avoid liquidation .
In addition to the still intact risk constellation and negativity of the previous week, reports of a rapid increase in Covid-19 cases in India and Japan.
Further, received with a little impact on the market last week given China’s known unfavorable position on the cryptocurrencies, deputy governor of the People’s Bank of China Li Bo said crypto assets are not really currencies in the monetary sense and could be used as alternative investment options.
He even went further to say stablecoins (cryptocurrency pegged to an outside asset, such as the U.S. dollar or gold to stabilize their price) issued by private entities need even stricter supervision (regulation) than cryptocurrencies such as Bitcoin.
The losses on the cryptocurrency market are still widespread and persistent downtrend appears to be prevailing at the moment, putting the market in a directionless position.
Even Tesla CEO Elon Musk wondered what would happen next, tweeting “What does the future hodl?” on Twitter – an intentional misspelling of “hold” that refers to a popular crypto meme used among cryptocurrency enthusiasts when encouraging traders to resist the urge to sell one’s holdings in response to market fluctuations.
The past week has been a costly lesson for the rookies who where stuffing their wallets with ‘upside momentum’ crypto coins, thinking valuations for everything they bought could only climb. The flush crash also showed novices the usually shrugged-off intrinsic vulnerability of cryptocurrencies to possible government regulations.
Further short-term recovery is still likely as many technicians, as well as old-school fundamental investors prefer to hunt bargains and value in a falling market after signs of panic, or capitulation by the bulls. Although trying to time the market is a fool’s game, the risk factors, especially when it comes to the seasonality have historically been significant.