Market Wrap: Cryptos Slip as Bitcoin Struggles to Hold $40K

Most cryptocurrencies traded lower on Friday, tracking losses in equities.

Bitcoin (BTC), the world’s largest crypto by market capitalization, dipped below $40,000, the midpoint of a three-month price range. Choppy trading conditions indicate uncertainty among traders, especially as macroeconomic and geopolitical risks linger.

Further, the rising correlation between BTC and stocks means investors are more sensitive to the impact of rising interest rates on asset values, similar to what occurred in 2014 and 2018. That could keep some buyers on the sidelines, which points to lower market returns, especially compared with the previous two years of unprecedented monetary and fiscal stimulus.

Just launched! Please sign up for our daily Market Wrap newsletter explaining what happens in crypto markets – and why.

On Friday, most alternative cryptocurrencies (altcoins) declined by less than bitcoin, which suggests the current pullback in prices could be temporary. Typically, altcoins underperform in a market sell-off because of their higher risk profile relative to bitcoin.

Technical indicators suggest that bitcoin could stabilize around $37,500 despite signs of slowing price momentum on the charts.

The chart below shows the downtrend in bitcoin’s implied volatility, which creates a difficult environment for some option traders who profit from unexpected price swings.

Still, traders have positioned themselves for short-term spikes in volatility or downside risk, especially around key events or announcements.

For example, on April 10, Arthur Hayes, co-founder of crypto derivatives trading platform BitMEX, warned about a BTC price crash toward $30,000. That blog post triggered massive selling of May and June option calls, which caused BTC and ETH risk reversals (calls minus puts) to fall from -6% to -10%, according to QCP Capital, a crypto trading.

“At the same time, the recent proliferation of algorithmic stablecoins seems to have placed a soft floor in the market,” QCP wrote in a Telegram announcement. “While this effect has provided some relief to crypto markets, it remains to be seen if this model is sustainable in the long run.”

Bitcoin’s put/call ratio ticked lower over the past few days, indicating a slight loss in bearish sentiment among options traders.

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.