The growth of infrastructure for investing in Bitcoin reinforces the correlation between the traditional market and cryptocurrencies, so recently the analysis of what is happening in the crypto market has often gone side by side with the stock market. Stock indices ended the trading week with a decline: the S&P 500 is holding barely above 3,000 points. Bitcoin also found itself on the lower bound of $9K, where it received very cautious support from buyers, which allowed the coin to hold on to $9,100 at the beginning of the working week.
However, we are witnessing consecutive lower highs and lows. The Bitcoin is balancing at an important level, and panic sentiment can provoke increased sell-offs. If the S&P 500 falls below the threshold, it could trigger a sell-off of risky assets, including Bitcoin. Given the relatively small size of the digital currency market, large capital will not need significant volumes to increase volatility in the crypto market.
Bitcoin is losing more than 3% over the week, while the leading altcoin Ethereum (ETH) fell by more than 4%. Almost all the altcoins from the top-10 are in the red zone. As always in the moments of selling on the crypto market, the Tether (USDT), in which investors park their funds after selling other digital currencies, demonstrates positive dynamics.
USDT took the third place by capitalization, ahead of XRP, and it is very likely that this trend will continue. However, USDT is still very far away from Ethereum, but judging by the trends in the crypto market, the demand for stable cryptocurrencies will only grow. It has become much more difficult for Bitcoin to attract retail demand as a large number of non-professional investors lost their assets in 2018 during the crypto winter when the value of Bitcoin fell from $20K to $3.5K.
While the general public, for the most part, stays away from the crypto market, institutions are building up assets. Grayscale investment fund increased its bitcoin assets to 400,000 BTC, buying more than the miners produce after halving in mid-May. The appearance of large capital on the crypto market was considered to be an absolute positive in 2017, but in reality, the result was exactly the opposite. In this case, too, the impact of such news on Bitcoin should not be overestimated, as retail demand should be a really strong driver, as well as a rapid increase in trading activity on small wallets. In this case, we are dealing with the centralization of both coins and network computing power.
Although the number of digital currencies on the market is approaching six thousand, The Block estimated that up to 80% of the trading volume on the largest platforms are only 2 coins – Bitcoin and Ethereum. Given that governments have blocked the attempts of major corporations to launch payment services based on their messengers (recently Brazil has blocked WhatsApp transfers), we get a rather alarming picture, where almost the only driver is speculation. Everyone is waiting for a new wave of growth, but if it does happen, even early investors may exit the market and the total number of sellers will reach such a critical mass that it will lead to structural changes in the crypto market. At the moment even Bitcoin maximalists will seriously consider selling if the price reaches $20K-$25K.