Market Wrap: Cryptos Pare Earlier Losses, Bitcoin Outperforms

Bitcoin (BTC) briefly rose above $30,000 on Tuesday, extending its weeklong trading range higher.

Most cryptocurrencies appear to be stabilizing alongside stocks, which indicates a pause in bearish sentiment among traders. Some technical indicators applied to BTC and the S&P 500 remain in oversold territory, although long-term charts suggest limited upside from here.

Some alternative cryptos (altcoins) rallied on Tuesday, albeit within a six-month downtrend. For example, Solana’s SOL token rose by as much as 2% over the past 24 hours, compared with a 3% rise in BTC over the same period. Still, SOL is down by 50% over the past month, compared with a 35% drop in ether (ETH) and a 27% decline in BTC.

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On the regulatory front, Alessio Evangelista, associate director for enforcement at the U.S. Treasury Department’s Financial Crimes Enforcement Network, spoke at a Thursday conference where he directed the crypto industry to proactively blacklist “problematic” wallets. Also, finance ministers from the Group of Seven (G-7) large developed economies are preparing to call for faster global crypto regulations, according to Reuters.

In traditional markets, stocks were mixed, while gold, a traditional safe haven asset, ticked higher. Meanwhile, the U.S. dollar turned lower after reaching its highest level in four years last week.

Bitcoin has been outperforming other cryptos over the past few months, which indicates a lower appetite for risk among traders.

Typically, bitcoin declines less than altcoins in a down market because of its lower risk profile relative to smaller tokens. The opposite is true in a rising market.

Only 15% of the top 50 altcoins have performed better than bitcoin over the past 90 days, according to the Blockchain Center. That indicates an aversion to risk.

Over time, however, a sustained rally in altcoins could signal a risk-on environment, similar to what occurred in January and August of last year.

The chart below shows the bitcoin dominance ratio, or BTC’s market cap relative to the total crypto market cap. The ratio broke above a short-term downtrend last week and continues to tick higher. A sustained reading above 50% would signal a risk-off environment similar to what occurred in 2018.

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

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.

UPDATE (May 18 20:45 UTC): Adds information on the U.S. stock markets and their declines.