After several weeks of high volatility, the cryptocurrency market calmed down, while trading volumes fell to a four-week low. Most cryptocurrencies have still not recovered after the May 19 fall. Despite the bulls’ attempts to push the quotes up, any hopes for continued growth were dashed by Elon Musk: another tweet from the CEO of Tesla (NASDAQ:TSLA) sent the crypto markets into a knockout.
Bitcoin (BTC) started the week with a promising growth at $ 34,000, on Friday the rate of the first cryptocurrency reached $39,500. The exchange rate collapsed after Tesla CEO Elon Musk posted a tweet in which he stated that his warm feelings for the dominant cryptocurrency had cooled.
Investors reacted negatively to such a tweet, which caused the exchange rate of the main cryptocurrency to drop to $ 35,000 by Sunday. Before that, Elon Musk had already caused a real stir in the cryptocurrency market with a series of tweets. In May, the billionaire had a strong negative impact on the crypto market, noting the harmful impact of bitcoin mining on the environment. He also said that Tesla will stop accepting bitcoins as payment for electric cars.
Since then, bitcoin has been going through one of the most difficult periods in recent times. In May, most cryptocurrencies showed the largest monthly loss since the collapse in March 2020 – since April, the drop was more than 35%.
Over the past week, bitcoin’s volatility and trading volume have decreased significantly, as evidenced by a decrease in the average true range (ATR) and the volume indicator. Meanwhile, the rate of the first cryptocurrency fluctuated between 34,000 and 39,500 US dollars. This kind of movement does not allow us to draw any conclusions about the future movements of bitcoin.
From the point of view of technical analysis, a flag pattern is formed by BTC. The flag pattern often indicates the imminent continuation of the main trend. Such patterns usually occur when the market pauses after significant fluctuations.
Traders using technical analysis perceive the flag pattern as a signal indicating the continuation of price movement after the market breaks through the support line. If the BTC rate continues to decline, it will lead to a bearish breakout, and the price will drop to $ 30,000. However, if BTC is able to gain sufficient growth momentum and resolutely overcome the resistance channels, a re-entry of $40,000 may be very close.
For bullish traders, the main event of the week was the Bitcoin 2021 conference in Miami. Among the highlights of the event was the announcement by the President of El Salvador, Nayib Bukele, about the imminent plans to introduce a bill according to which bitcoin will be recognized as a legal means of payment within the country. This statement seems to be a significant step towards bitcoin and the entire crypto economy, as well as the legalization of the crypto industry as part of mass adoption. Despite the positive development of events, the news did not affect the rate of the first cryptocurrency: the price of bitcoin fell to $ 35,000.
Ethereum and Altcoins
Ethereum (ETH) continues to strengthen – last week the exchange rate of the asset increased by 13.7%. For the second week in a row, it has been accompanied by strong growth after the crash on May 19. Cryptocurrency remains among the leading assets with high capitalization – over the past two weeks, the market value has increased by $ 90 billion.
After the collapse on May 19, ETH surpassed BTC in terms of growth, which is noticeable by the trend on the chart of the ETH/BTC pair. The relative strength of ETH can be explained by the improvement in the fundamentals of the asset. Analysts note that institutional interest is increasingly shifting away from bitcoin towards ether, the second largest cryptocurrency by market capitalization. With the upcoming launch of an exchange-traded ETH (ETF) fund, institutional investors can gain positions in anticipation of an increase in demand.
Last week, the ETH exchange rate showed impressive growth, rising by more than 29% and reaching a maximum of 2,891 US dollars. However, the positive sentiment was quickly put to an end by Elon Musk’s tweet. Since then, ETH has fallen by 6%, but remained in the critical consolidation zone (range from 2,600 to 2,800 USD).
A decisive break above $2,891 will resume bullish momentum and revive the uptrend. If this happens, ETH may retest the $3,200 level – this is the first major zone since mid-May.
Solana (SOL) shows some of the most confident indicators in recent weeks, despite a drop of 67% compared to the peak. The SOL price showed a noticeable recovery, with the exchange rate rising by 120% from the low of May 23. A key factor in SOL’s recent success can be considered the team’s plans to attract large investments (up to 450 million US dollars) to expand the ambitions of the project. The developers plan to turn the blockchain into the main place for decentralized applications – such significant investments can support the price of SOL.
The SOL exchange rate has successfully demonstrated a V-shaped recovery, despite the weak sentiment in the cryptocurrency market. The asset is currently trading above both the 21- and 55-day moving averages. SOL contracts also aroused considerable interest in the derivatives market, as a result, the trading volume and open interest in SOL futures contracts increased significantly over the past week.
The volume of SOL/USDT contracts amounted to more than $4 billion compared to $2.5 billion in the previous week. Open interest in SOL contracts has grown from $18 million to over $34 million.