Market Wrap: Bitcoin Dips as Macro and Geopolitical Uncertainties Remain

Bitcoin (BTC) and other cryptos traded lower on Thursday, tracking declines in stocks.

Concerns about macroeconomic and geopolitical risks continue to linger, which has kept some buyers on the sidelines. For example, during a news conference on Wednesday, Russian President Vladimir Putin said that peace talks with Ukraine have reached a dead end. Putin also pledged that Russia’s “military operation will continue until its full completion.”

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Geopolitical uncertainty is one reason why gold, a traditional safe-haven asset, and oil have been well bid this year. Cryptos and stocks, however, have traded in a choppy price range, reflecting uncertainty among market participants.

BTC struggled to hold above $40,000 on Thursday while ether (ETH) traded around $3,000. Meanwhile, most alternative cryptos (altcoins) underperformed BTC, suggesting a lower appetite for risk among crypto traders. WAVES and LUNA have declined by more than 20% over the past week, compared with a 7% loss in BTC over the same period.

The chart below shows bitcoin’s dominance ratio, or BTC’s market capitalization relative to the total cryptocurrency market cap. The ratio has been stuck in a year-long range, similar to BTC’s price, which reflects neutral sentiment among crypto traders.

Typically, a rise in the dominance ratio indicates a flight to safety, similar to what occurred during the 2018 crypto bear market. Further, BTC declines less than altcoins during times of market stress. The opposite is true during crypto rallies.

From a technical perspective, the dominance ratio is consolidating after a steep decline last year when altcoins such as ETH rallied ahead of BTC. This year, however, altcoins have fallen in and out of favor amid geopolitical and macro risk.

The dominance ratio is still above its 2018 low at 35%, which means alts could have additional room to outperform over the short term, so long as resistance at 47%-49% holds. Still, a breakout above resistance would indicate a risk-off environment.

For now, large bitcoin investors, or whales, have started to take profits on price rallies. That could indicate some anxiety among the whales, who typically accumulate on price dips over the long term.

The chart below shows that the number of addresses with a balance of more than 10,000 BTC has decreased substantially over the past week or so.

“In this period, at least four whales have sold their bitcoin – this may seem insignificant, but each of these addresses has sold more than $400 million worth of bitcoin,” Marcus Sotiriou, an analyst at the U.K.-based digital asset broker GlobalBlock, wrote in an email to CoinDesk.

“This is an important metric to look at because whales typically have the power to control the direction of the market,” Sotiriou wrote.

Smaller whales, or investors holding more than 1,000 BTC, have also taken some profits over the past month. The chart below shows the seven-day moving average of smaller whale balances, which appears to be stabilizing.

Sotiriou is still optimistic for the crypto market over the short term because of extreme negative sentiment among traders. Indeed, the bitcoin Fear & Greed Index reached “extreme fear” territory this week, which typically precedes price jumps, albeit with a long lead time that can span several months.

Most digital assets in the CoinDesk 20 ended the day lower.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.