First Mover Asia: Bitcoin Dominates but Altcoins Lurk

The largest cryptocurrency was up slightly but still trading below $30,000 and about midway in the two thousand dollar range that it's occupied for almost two weeks since the crash of the UST stablecoin.

Other major cryptos also rallied late to hit green, albeit not by much, as investors gripped tightly to their risk-averse bearishness.

Near the time of publication, bitcoin was trading at about $29,700, a 2% gain. Ether, the second largest crypto by market cap, was recently up less than a percentage point, while XRP, SOL and the meme coin SHIB each rose over 1%. Bitcoin's price has dropped for eight consecutive weeks.

"Bitcoin is in the danger zone as sentiment for risky assets have fallen off a cliff," Oanda Senior Market Analyst The Americas Edward Moya wrote.

Stocks about-faced from their healthy Monday gains after social media platform Snap Inc. (SNAP) issued a profit and earnings warning that swept up the tech sector, and the U.S. 

Commerce Department reported that new home sales plummeted 17% in April to hit a two-year low. The tech-focused tech-focused Nasdaq plunged 2.3%. The S&P 500 also fell, albeit more moderately.

Snap shares declined over 40% from their Monday close after the company said its revenue and profit would miss earlier projections for its second quarter, a victim of inflationary pressures and macroeconomic turmoil. 

According to The Wall Street Journal, the company's CEO, Evan Spiegel, said in a presentation prior to the warning that he had asked managers to look for cost savings. Tech giants Meta (FB) and Google (GOOG) dropped about 7% and 5% respectively

The housing report reflected the impact of rising mortgage rates on would-be home buyers who are now priced out of loans they might have afforded when borrowing costs were lower earlier in the year.

Meanwhile, the manufacturing and service purchasing managers index dropped to three- and four-month lows, primarily victims of rising prices.

In the smallest sliver of good news, the bitcoin Fear & Greed Index, which has been stuck in "fear" zone over the past month and reached its second-lowest recorded fear level in the index's history last week, has improved slightly the past few days, suggesting bearish sentiment could diminish, particularly if bitcoin crosses $30,000.

But Oanda's Moya noted that even falling Treasury yields, "which makes crypto attractive," have failed to move investors. 

"Right now, no one wants to buy this dip," he wrote, adding that bitcoin could test support just above $25,000 and that $20,000 remains a possibility. 

"Bitcoin can't stabilize until Wall Street sees calm and that might not happen for a little while longer."

Bitcoin’s dominance of the broader crypto market cap reflects traders’ risk tolerance and market sentiment. 

When conditions turn bullish, traders move capital into Ethereum and other layer 1, or base, blockchains in order to take advantage of the decentralized finance (DeFi) market. 

Likewise, a bearish market brings back traders into the safe haven of bitcoin, crypto’s "digital gold."

With the implosion of the Terra ecosystem, many layer 1s have been hit hard: Solana is down 50% during the last month, Avalanche is down 60% during the same period, and Polygon lost just over 53% of its value.

While Terra’s collapse leaves many with existential questions about the future of crypto and DeFi as an investment vehicle, traders appear to be preparing to return to altcoins, with data suggesting that bitcoin’s dominance might be short-lived.

According to CoinGlass, funding rates for ether and major alts are working in the favor of long traders. Funding rates are turning negative, which means that short sellers are being liquidated in favor of those with long positions.

Likewise, the ratio of long positions to short has moved in favor of longs for ether, DOT and SOL as per CoinGlass’ data.

There’s still a long way to go before we can declare another season of the alts, despite a few green sprouts. 

The total value locked into DeFi protocols, the vehicle in which many alts are used, doesn’t show any signs of improvement.

DeFiLlama has the total locked-in value at $111 billion, down from around $205 billion at the start of the month, before Terra’s planetary collapse, and well below the $250 billion in DeFi in December of last year.

The fact that so much wealth vanished in the last two weeks is going to give many traders pause, especially as institutional investors lost billions of dollars. But we are seeing that conviction remains in the asset class, even as it's tested time and time again.

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