The similarity in price action between the cryptocurrency market and traditional financial markets remains quite strong on May 10, as traders enjoyed a relief bounce across asset classes after the May 9 crash. May that saw Bitcoin (BTC) briefly crash to $29,730.
Market declines typically translate into larger losses in altcoins due to a number of factors, such as a shortage of assets being traded and low liquidity, but this also translates into larger rebounds once the recovery occurs.
Several projects posted double-digit earnings on May 10, including a 15.75% profit for Maker (MKR), the protocol responsible for issuing the stablecoin DAI (DAI), which likely benefited from the fall of Terra (LUNA) and its stablecoin, TerraUSD (UST).
Other notable gainers include Persistence (XPRT) and its liquid staking token pSTAKE (PSTAKE), which saw gains of 16.4% and 39.8% after Binance Labs revealed a strategic investment in the liquid staking platform. Polygon (MATIC) also rallied with a 14.59% gain.
Correlation with traditional markets is maintained
Despite the widespread belief that the cryptocurrency market would act as a hedge for 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 begun to rear its ugly head in traditional markets, as evidenced by the price action for the Dow Jones Industrial Average on May 10, which rose over 500 points just to yield at the time of writing.
The Nasdaq and the S&P 500 have performed slightly better, with gains of 0.9% and 1.92% respectively.
The Bitcoin Analyst Willy Woo provided further evidence supporting a correlation between cryptocurrency and traditional markets, and posted the following chart noting that: “the basics [están] taking a backseat to fear-driven operations.
Willywoo said:
“What I believe is that we are not trading BTC, we are trading the macro and equities. The right panel is the SPX support that will determine the directionality of BTC, the left panel is the equivalent BTC support.”
The S&P 500 could fall much further
While today’s relief rally sent cryptocurrency and stock prices higher, market analyst Caleb Franzen public the chart below warning of a bearish head and shoulders formation on the S&P 500 chart that could result in the loss of another 500 points.
franken said:
“It’s hard to pick downside targets after my $4,000 call was hit, but I think the most likely support zone is around $3,530-$3,590. This is the target resistance range for September to October 2020.” .
The total cryptocurrency market capitalization currently stands at $1.44 trillion and the Bitcoin dominance ratio is 41.5%.
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