What’s next for the cryptocurrency market?

After a week of massive volatility and slump, the cryptocurrency market has mostly recovered this week with some of the digital coins far surpassing the market average.

Bitcoin, the world’s biggest crypto coin with more than $1 trillion market cap, has continued to hover around the US $55,000 mark with the upward momentum running out of steam, at least for now. At this level, the sellers appear to be in charge at the moment.

Despite rejected at this level, the subsequent downtrend has not been that intense and has managed not to stick around US $55,000, which shows substantial buy orders above US 54,000.

Ether (ETH), the second-largest virtual currency, hit another all-time high of US $2,754 before settling at US $2,742 amid the accommodating views for institutional legitimacy of crypto investment.  Ether’s total market capitalization is above US $ 20 billion now, a third of bitcoin.

Among the other free-floating crypto assets in the Big Cap 10, ripple (XRP) is changing hands at US $1.35, Binance Coin (BNB) US $571, cardano (ADA) near US $1.33, Dogecoin (DOGE) US $0.31, ChainLink (Link) US $36, Stellar (XLM) $0.49, Litecoin (LTC) US $257 and Vechain (VET) US $0.16.

Meme-inspired Dogecoin (DOGE) price jumped from US $0.26 to above US $0.33 after Tesla CEO Elon Musk tweeted “The Dogefather SNL May 8”, a hint at his appearance as a host on Saturday Night Live next week.

On the news side, there were media reports that Turkey will establish a government-owned custodian vault after the sudden collapse of two crypto exchanges Thodex and Vebitcoin. Crypto assets have drawn Turkish citizens seeking to protect their local-currency savings threatened by falling lira and rising consumer prices in the country.

Price movements and range-bound swings in the past 72 hours show the rapid recovery from the previous week’s flash crash has mostly stalled after providing the much needed lift for the bitcoin and most major altcoins which were  closely moving in lockstep.

However, upward push in most currencies appears to be running out of steam and we may see a market-wide pullback towards this weekend.

Note a pullback should not be confused with a reversal as a pullback is a temporary pause or dip which might actually quickly turn into an upward momentum while a reversal is a more long-term drop against the otherwise prevailing trend. It happens because bargain hunters usually see pullbacks as an opportunity to top up their wallets and support the price upwards.  Some indicators, including moving averages and pivot points can be used to decide whether a pullback is actually turning into a reversal.

It is important to note that the range in price swings at the moment shows any possible pullback would likely be limited in the magnitude due to strong support under the current levels.

Despite the downside risks, positive traction might be possible if there comes further significant improvement to increase risk appetite.

The vicious sell-off last week has been a costly lesson for the rookies who were stuffing their wallets with ‘upside momentum’ crypto coins with a false sense of security, thinking their holdings could only climb.  The flush crash was indeed a timely reminder to novices  – many of whom tend to shrug off intrinsic vulnerability of cryptocurrencies to possible government regulations  – of just how quickly sentiment can sour.

With the market filled to the brim with froth, the recent market volatility shows how those who ran with their emotions and moved out of the market have been blindsided by how fast it has recovered.

The liquidations were further amplified by the leverage used by many traders.  Many crypto exchanges allow traders to trade on a margin account (using leverage), which means that they can use a relatively small amount of money upfront to borrow the rest in order to hold large amounts of digital assets.  Although the leverage magnifies profits if the price goes in the favorable direction (depending on short or long orders), it leaves traders in a much more vulnerable position if price goes in the wrong direction.



Risk Warning: Cryptocurrency is a unregulated virtual notoriously volatile asset with a high level of risk.  Any news, opinions, research, data, or other information contained within this website is provided for news reporting purposes as general market commentary and does not constitute investment or trading advice.