Bitcoin, Ethereum and other major cryptocurrencies crashed, erasing around $100 billion from the combined crypto market. At press time, the global cryptocurrency market cap has fallen more than 7% to $1.6 trillion.
The sudden plunge comes amid the aftermath of the Federal Reserve’s hawkish 50 basis point rate hike. In addition, the Bank of England also hiked interest rates by 25 basis points.
Here’s what’s in store for you
Market data platform Santiment said traders appeared to believe the cryptocurrency’s surge on Thursday was an “anomaly.” Yesterday’s market cheer met extreme sell calls as seen in the chart below.
Source: Santiment
According to the analysis company, the above image showed,
“Crypto Traders appear to believe that yesterday’s market-wide price increase was an anomaly and the brief celebration will not last. Historically, if requested #Sale spikes, crowd (FUD) This strengthens the case for a sustained rise.”
The collective market did not paint a stable picture for a short-term recovery in digital assets. Bitcoin, the largest cryptocurrency, is actually the first victim of this scenario.
On the derivatives side, over 26,500 BTC worth of open positions were added to the market, but during Thursday’s sell-off most of those 25,000 BTC open positions were closed, according to a tweet from Glassnode.
#Bitcoin futures markets have been in a 24-hour whirlwind following yesterday’s Fed rate hikes.
Over $26.5k worth of BTC was added to the market during yesterday’s rally.
However, during today’s sell-off, almost all open interest (~$25,000 BTC) was closed. pic.twitter.com/2yytI5wHIw
— glassnode (@glassnode) May 5, 2022
Furthermore, the implied dovish stance published by the Fed has not dented investors’ bearish expectations of the futures markets. BTC futures expiring in late 2023q1 as an example – their futures premium has shown a continuous downtrend and has recently fallen below 4%.
Source: Deribit
Typically, a premium of less than 4% meant a further deepening of bear market sentiment.
More pain ahead?
Needless to say, such a situation could create “chaos” or rather create a sense of urgency in the crypto market. For example, according to one analyst, BTC needed to demonstrate its dominance to avoid further sell-offs.
Data shows #Bitcoin broke a key support level at $38,670 where 2 million addresses hold over $1 million BTC. #BTC needs to quickly reclaim $38,670 as support to prevent these addresses from selling some of their holdings as the next key support lies at $28,500. pic.twitter.com/YwnfbdyNt1
— Ali Martinez (@ali_charts) May 5, 2022
Well, yes, despite such headwinds, some opportunities could also shine. A sluggish but stable market could offer some profit opportunities – because option sellers can at least consistently make some profits over time.
It is not difficult to predict that options time value based strategies would become a significant source of revenue for the crypto market in the future.
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