Cryptocurrencies weaken at the end of the week

The cryptocurrency market is retreating during Friday's session and introducing uncertainty among investors. In the past, it was often the weekends and week openings that were periods of heightened volatility in the cryptocurrency market. Is the sector in for another strong wave of declines?

• Buyers recently managed to lift the price of Bitcoin back above $30,000, causing bulls to expect a broader rebound. However, the price reactions of the 'king of cryptocurrencies' in the zone above $30,000 indicated a still strong and active supply;

• Bitcoin this Friday is again showing a correlation with weak sentiment on indices, most notably the NASDAQ technology index. The divergence that occurred last Friday when the index gained 3.5% and Bitcoin fell did not last long. It is worth pointing out, however, that Bitcoin fell both when the NASDAQ was surging and when contracts on the NASDAQ were losing, potentially indicating demand getting closer to capitulation.

• There is no doubt that there is extreme fear in the cryptocurrency market, as evidenced by the updated 'Fear and greed index'. In the past, price levels reached by Bitcoin when sentiment was very negative have proven to be suitable places to buy. At the same time, however, in the case of preserved cyclicality in the cryptocurrency market, the 'extreme fear' index alone does not mean that the price has already reached a price bottom, the potential for declines in the event of a downturn still exists;

• Positive opinions of JP Morgan analysts, who pointed to the undervaluation of Bitcoin, whose price should be currently at $38,000, did not cause investor euphoria or even the expected 'relief rally' which also indicates strong negative sentiment and very active supply;

• Ethereum is in a potentially key zone for demand, in the $1,600 - $1,800 range. If it is defended once again, it could mean a strong upside momentum, however, if it is supply that manages to break out of support we could see high volatility downwards caused by, among other things, the liquidation of many long leveraged positions in these zones. Also, bulls in the options market may be forced to exit Ethereum due to the rising cost of premium to hold positions. The still bullish RSI indicator has not translated into an increase in ETH prices;

• The markets' expected 'merge' of Ethereum to version 2.0, which is considered the most important cryptocurrency market event of 2022, has not supported the token's rising price so far and, contrary to expectations, has still not triggered the 'rally under event' characteristic of a bull market. It is the nature of the market that not everyone can be right about the course of such events. It is often completely different from the expectations and perceptions of most investors. At the same time, however, the powerful growth of the Ethereum network in an environment of melting supply can support long-term investors and create a real wave of demand if large volumes return to the market.

• Sentiment is also weakening among other, smaller cryptocurrencies. This is well illustrated by Dogecoin's lack of a strong price reaction on Elon Musk's acceptance of payments with this cryptocurrency, which gained nearly 10% at the time and quickly gave back the growth. During the bull market, such news among 'altcoins' often ended with several hundred percent increases;

The number of entities holding more than 10,000 BTC has steadily increased. The trend also seemed immune to the fall of Terra (Luna). The project held the place of one of the leaders in the crypto industry. Source: Glassonde