According to financial research firm Fundstrat, with increased volatility over the Memorial Day weekend in the US, the crypto market could get “weird” and investors would be wise to rein in risky investments. Here are the expectations of analysts for the area where cryptos such as SHIB, ADA, BTC, DOGE …
Fundstrat analyst warned: Attention this weekend!
Sean Farrell, head of digital asset strategy, said in a note released Thursday that the combination of several factors created the perfect storm for prices to fall over the weekend. Adverse macroeconomic factors, including low liquidity in the crypto market, increased leverage, and the Fed’s efforts to tighten monetary policy, can lead to large price swings.
The cold of crypto winter has pushed top cryptocurrencies to record year lows. Bitcoin, the most popular cryptocurrency, was trading at $28,800, down more than 38 percent so far Friday, and Ethereum was trading at $1,700, down nearly 52 percent since the start of 2021. It is far from both Bitcoin and Ethereum records.
According to Farrell, this weekend may present a more negative picture for crypto traders who have already suffered losses. On Memorial Day weekends in 2020 and 2021, crypto trading volume dropped by 43 percent and 35 percent, respectively, with many institutional traders taking the weekend off. This low liquidity could cause price volatility again this year. “The takeaway here is that liquidity will be extremely low this weekend and most of the holidays beyond, which could lead to extreme price volatility,” Farrell wrote in the report.
Bitcoin, what are the factors driving the SHIB space?
Another contributing factor to potentially negative weekend prices is the growing number of futures contracts for Bitcoin. Farrell wrote that a drastic move in either direction could result in massive liquidations, as these contracts allow investors to bet up or down on the future price of Bitcoin. Low liquidity and high leverage, combined with the Fed’s plans to raise more half a percentage point in the coming months, could lead to selloffs in crypto. “Macro is currently driving everything in crypto,” Farrell wrote in the report.
“US continues to be a burden with rising prices and rate hikes leading to valuation compressions across all risk assets.” Farrell said that to hedge against volatility, traders can sell lesser-known risky “altcoins” and buy short-term sell protection on their long crypto positions that will temporarily protect against falling prices. Yet despite the increased volatility over the weekend, Farrell said that Fundstrat expects crypto prices to increase in the second half of 2022.
Bitcoin dominance grows: What’s next for SHIB, DOGE, ADA this weekend?
Although the global cryptocurrency market has been volatile lately, forcing cryptocurrencies like Terra (LUNA) to lose all their value, Bitcoin has remained relatively stable. On May 27, the Bitcoin Market Domination index, which compares the market cap of BTC with the rest of the cryptocurrency market, hit a new high of around 47 percent, the highest since October 2021. ETH, the largest altcoin by market cap, has shown steady declines in market dominance over the past five months, falling from 22.38% in December 2021 to 17.86% in May 2022. The decline follows a two-year increase.
In recent years, ETH has outperformed Bitcoin due to the excitement surrounding the long-awaited protocol upgrade called “Merge”, which aims to make Ethereum more scalable and cheaper. showed. However, as we also reported at Kriptokoin.com , the upgrade attempting to convert Ethereum’s Blockchain from PoW to PoS has been delayed several times.
What are the prospects for the ETH hype?
According to OxHamZ, an independent market analyst, Ethereum lacks narratives to drive ETH’s price up after its update because investors have already “priced in” with network upgrade hype. Meanwhile, the decline of the Terra (LUNA) market seems to have contributed to Bitcoin’s newly discovered crypto market strength. In May, the value of LUNA/BTC, a financial instrument that measures the strength of the Terra token against Bitcoin, dropped 99.99 percent, rendering it nearly worthless.
What’s the narrative to own ETH after the merge?
All KPIs are down
Active wallets stagnant
NFT hype dead
LP trading volumes trending poorly
Liquidity shrink in stables
L2 cannibalization growing (h/t @TaschaLabs)ETH is down 50% but the value of its block-space is also down
— 0xHamZ (@0xHamz) May 25, 2022
Meanwhile, LUNA has depreciated against the dollar, with traders’ token BTC and fueled speculation that he was selling in favor of cash. The altcoin market as a whole, which includes everything from large-scale blockchain projects to dubious crypto assets, has dropped roughly 65% since it hit over $1.7 trillion six months ago. A closer look at a few tokens reveals that unlike Bitcoin, the majority are down more than 80 percent from all-time highs, suggesting a general investor is shifting from altcoins like SHIB to cash, stablecoins or BTC. .
