The similarity in price action between the crypto and traditional financial markets remains fairly strong on May 10 as traders saw a bounce of relief across asset classes following the May 9 defeat that saw Bitcoin (BTC) briefly drop to $29,730.
Market downturns typically result in bigger losses for altcoins due to a variety of factors, including thinly traded assets and low liquidity, but this also translates into bigger price jumps once a recovery sets in.
Several projects posted double-digit gains on May 10, including a 15.75% gain for Maker (MKR), the protocol responsible for issuance of the stablecoin DAI (DAI), which is likely to be affected by the fallout from Terra (LUNA) and its TerraUSD (UST) profited ) stablecoin.
Other notable gainers include Persistence (XPRT) and its liquid staking token pSTAKE (PSTAKE), which posted gains of 16.4% and 39.8% after Binance Labs announced a strategic investment in the liquid staking platform . Polygon (MATIC) also recovered, up 14.59%.
The correlation with traditional markets remains
Despite the widespread belief that the crypto market would act as a hedge against TradFi volatility, the correlation between Bitcoin and the stock market has remained high in 2022.
If anything, the volatility normally associated with the cryptocurrency market has started rearing its ugly head in traditional markets, as evidenced by price action for the Dow Jones Industrial Average on May 10th went up more than 500 points only to give back at the time of writing.
The Nasdaq and S&P 500 fared slightly better, gaining 0.9% and 1.92%, respectively.
Further evidence of a correlation between crypto and traditional markets came from Bitcoin analyst Willy Woo, who published the chart below, noting that “Fundamentals [are] take a back seat to fear driven trading.”
Willy Woo said:
“I think we don’t trade BTC, we trade macros and stocks. The right area is the SPX support that determines the BTC direction, the left area is the corresponding BTC support.”
Related: Michael Saylor reassures investors after market slumps hurt $MSTR, $BTC
The S&P 500 could fall much further
While the May 10 recovery rally sent crypto and stock prices higher, said market analyst Caleb Franzen sent The chart below warns of a bearish head and shoulders formation on the S&P 500 chart that could result in a loss of another 500 points.
“Hard to pick down targets after hitting my $4000 call but I think the MOST LIKELY support zone has dropped around $3530-3590. This is the September-October 2020 white resistance range.”
The total cryptocurrency market cap is now $1.444 trillion and Bitcoin’s dominance rate is 41.5%.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.
https://cointelegraph.com/news/altcoins-stage-a-relief-rally-while-bitcoin-traders-decide-whether-to-buy-the-dip Altcoins are staging a recovery rally as bitcoin traders decide whether to buy the dip