Market Wrap: Bitcoin Stabilizes as Altcoins Take the Lead

Bitcoin (BTC) held steady around the $40,000 price level on Thursday while several alternative cryptocurrencies (altcoins) took the lead.

The rise in altcoins over the past few days suggests a greater appetite for risk among crypto traders. BTC and ether (ETH) were up 2% over the past 24 hours, compared with a 20% rally in Pancake Swap (CAKE). But there were some misses, especially in ApeCoin, the token linked to the popular Bored Ape Yacht Club (BAYC) non-fungible token (NFT) collection, which dropped as much as 80% on Thursday.

Despite occasional rallies and crashes, it appears that major cryptos (large market capitalization) such as BTC and ETH are stabilizing after a volatile past few days.

Global equities are also higher, especially in Asia, after China’s government pledged support for its stock market on Wednesday. Some analysts expect China’s central bank to maintain low interest rates this year, which could keep the economy afloat despite the rise in COVID-19 cases and geopolitical woes.

And on the macro front, analysts expect limited upside for the U.S. dollar, which could be positive for bitcoin over the short term.

“The U.S. dollar has appreciated since Russia began its invasion of Ukraine, which is not a surprise given that the greenback has a track record of appreciating in response to geopolitical events,” MRB Partners, a global investment research firm wrote in a report. “However, this strength has generally been followed by a consolidation phase.”

Bitcoin’s trading activity remains relatively low across major exchanges, according to CoinDesk data.

The recent peak in BTC volume was seen on Wednesday when the U.S. Federal Reserve’s rate hike triggered 5% price swings. Still, trading activity has been low relative to prior volume spikes such as the price sell-off in late January and the beginning of the Russia-Ukraine war in late February.

Some analysts have increased their price targets for bitcoin, while others remain cautious because of ongoing macroeconomic and geopolitical risks.

“The Fed rate hike was not damning enough to worry crypto investors, hence solidifying renewed buying spirit,” Alexander Mamasidikov, co-founder of mobile digital bank MinePlex, wrote in an email to CoinDesk. Mamasidikov expects selling pressure to subside toward the end of the second quarter, and has a price target at $50,000 for BTC.

Still, bitcoin will need to make a decisive break above the $40,000 psychological barrier to trigger an increase in buying activity. So far, volatility hasn’t been particularly high “taking into account a barrage of largely negative news over the past few days with COVID-19 cases rising and China’s Shenzhen province going into lockdown,” Mikkel Morch, executive director of ARK36, a crypto investment fund, wrote in an email.

Generally, the narrative of bitcoin as a safe haven and store of value has been consistent across some analyst commentary despite the recent decline in a risk-off environment, similar to what occurred in 2018 and 2020.

Despite short-term stabilization, bitcoin’s market capitalization relative to the total crypto market cap remains elevated this year. Typically, BTC outperforms (declines less) in a down market because of its lower risk profile relative to altcoins.

Digital assets in the CoinDesk 20 ended the day higher.

There are no losers in CoinDesk 20 today.

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.