On May 10, the cryptocurrency-to-traditional financial market price action was comparable, with traders seizing on a resurgence bounce in asset classes following the May 9 sell-off, which saw Bitcoin (BTC) fall to $29,730 for only a few minutes.
When the stock market drops, cryptocurrencies fall harder because of a number of reasons, including thinly traded assets and low liquidity, but this also leads to bigger rebounds once things recover.
On May 10, 16 firms reported double-digit gains, with Maker (MKR) the DAI (DAI) stablecoin’s protocol gaining 15.75 percent as a result of the scandal surrounding Terra (LUNA) and its UST (UST) fixedcoin.
With numerous movers, the liquid staking platform is getting traction. The liquid staking token from which it derives its name, pSTAKE, which rose by 16.4% and 39.8%, respectively, after Binance Labs revealed a significant investment in the liquid staking platform, was joined by Polygon (MATIC), which rebounded with a 14.59 percent increase in price.
Despite the fact that many people believe that crypto markets would act as a hedge to TradFi volatility, the link between Bitcoin and the stock market has remained strong in 2022.
On May 10, the Dow Jones Industrial Average rallied more than 500 points before settling down at the time of writing, despite the fact that nothing has changed since last Friday.
The Nasdaq Composite Index and the S&P 500 have both increased by 0.9% while the Dow has slipped 0.64%.
Data from traditional markets and crypto markets appear to confirm a connection. Bitcoin analyst Willy Woo produced the following graph, which shows how “fundamental[s]” have taken a backseat to “fear-driven trading.”
BTC/USD 1-week chart vs. SPX 1-week chart. Source: Twitter
Willy Woo said, “What I do think is we are not trading BTC, we are trading macro and equities. Right pane is SPX support, which will determine BTC directionality, left pane is the equivalent BTC support.”
S&P might plunge even further –
On May 10, the relief rally sent both crypto and stock prices higher, but market analyst Caleb Franzen posted the following chart predicting that a bearish head and shoulders pattern on the S&P 500 chart might result in another 500 points being lost.
SPX/USD 1-day chart. Source: Twitter
Franzen said, “Hard to pick downside targets after my $4,000 call got hit, but I think the MOST LIKELY support zone is down around $3,530–$3,590. This is the white resistance range from September–October 2020.”
The cryptocurrency market cap is now around $1.444 trillion, with Bitcoin’s dominance rate at 41.5 percent.
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