During this Friday’s session, the representative index of the U.S. stock market, the S&P 500, fell momentarily by 2.3% to fall to -20.9% from its daily peak in January. At the same time, the price of Bitcoin lost 4.5% and slipped to $28,813. Overall, the crypto market will have fallen by 3.14%.
Recap of the past few weeks
With Bitcoin trending sideways during April, you were warned about the bearish nature of May for risk assets. Unfortunately, the adage of “Sell in May and Go Away” will have its way with the financial markets, as they will experience a rather brutal capitulation phase during this month. On May 18, Wall Street recorded one of its worst trading sessions since 2020. Also, the macroeconomic and geopolitical backdrop is not too favorable for the prospects of a bullish recovery.
Bitcoin suffered from its correlation to the US market but also from the collapse of Terra’s stablecoin during May. Its price lost the $33,000 support line and eventually hit a record low in its cycle (All Time Low) at $25,400. While it is trying to consolidate above $27,000, Bitcoin hasn’t completely shielded itself from the ultimate scare scenario, as when we look at the asset’s option market data, we see that for the 57,000 BTC options expiration on the day of the 27th, there are a good number of contracts that are placed for Bitcoin at $20,000.
Bitcoin is too tied to the US market
On May 20, the S&P 500 came close to the Bear Market by falling -20.9% from its record high (All Time High). As a reminder, it is conventionally said that an asset enters the Bear Market when its price is -20% of its historical high. Which, in hindsight, means that Bitcoin has been in the Bear Market since December 2022. However, crypto investors refer to a Bear Market when a sequence of volatility hits crypto currencies until they lose more than 50% of their value.
When it comes to crypto currencies, there isn’t a coin in the top 20 whose price isn’t at least 50% behind its all-time high. Here are some examples:
- Bitcoin: -57.09% from its peak at $69,044
- Ethereum: -60% from peak at $4878
- Dogecoin: -88.7% from peak at $0.96
- Axis Infinity: -87.5% from its peak at $165.99
This drastic decline in cryptocurrencies is neither related to the threat of regulation nor to other factors specific to the asset class. Instead, adoption continues with more traditional companies joining the sector. In a previous article, Be[In]Crypto showed how Bitcoin’s on-chain data is below its record levels. Similarly, Ethereum is planning to complete its migration to Proof of Stake within this year.
Thus, the fall of Bitcoin and other cryptocurrencies can be explained in part by its correlation to Wall Street. In early April, the correlation (Bitcoin – SP 500) reached a new high. And for more than seven weeks now, both asset classes have had a weekly candle in the red
What are the levels to watch for in the short term?
With its performance over the past two weeks, Bitcoin is clearly showing that it has lost the support line at $33,000. Now, the asset is trying its best to consolidate around $27,000 – $29,000. If it loses this area, the next landing would be around $23,000 based on the analysis.
However, this expert who had established a floor at $27,000 for Bitcoin tells us that there is a probability that the asset will plunge to $15,000.
Being able to change your mind is a sign of intelligence. If the #Crypto market was in a bubble, I would say 25k to 27.5k is the floor for #Bitcoin, but there is a decent probability that macro factors will drag us down to a floor at 22-24k. A significant black swan; 15-20k becomes a possibility.
PlanC said on Twitter
