Cryptomarket’s drop, is Bitcoin losing its influence on altcoins?

It’s a surprising situation that seems to be taking shape in the cryptocurrency market. While Bitcoin’s price has been undergoing a new drop for the past week, some altcoins are doing much better. Bitcoin is indeed experiencing one of the biggest declines in the top 50. It has lost nearly 29% in a week and is trading at around €32,800 ($40,000) as of May 19. We will come back later in this article to the purely technical arguments that explain this downtrend. At the same time, altcoins like Cardano (ADA) or Polygon (MATIC) are experiencing a strong increase and even record prices. This is very rare. Is Bitcoin losing its role as a market driver? Two events may be the cause of Bitcoin’s current feverishness.

First of all, how can we not talk this week about Elon Musk, the truculent boss of Tesla and SpaceX? Through his interventions on the social network Twitter, he made a rather unexpected turnaround of opinion: best supporter of Bitcoin in January, he now denounces the digital asset. On May 13, he pointed out the environmental concerns associated with Bitcoin mining and announced that he would no longer sell Tesla vehicles in exchange for Bitcoin. The crypto-currency loses 6% in one hour and starts the decline in which we are still. However, we must put this into perspective: we are far from a collapse of the price. But the influence of one man on the price of the first cryptocurrency raises questions about the maturity of this market.

Secondly, the Tether teams, behind the USDT dollar stablecoin which has by far the largest volumes in this market, revealed the breakdown of their asset reserves. A transparent operation, but one which revealed that only 4% of the collateral guaranteeing the value of stablecoin is held in cash, while 65% is "cash equivalents". The real strength of this collateral may therefore be questionable.

In the face of these events, Bitcoin’s share of the overall market capitalization is on historic lows, around 38%. Surprisingly, a number of altcoins are resisting. Ethereum is also falling back after a very strong rise. But cryptocurrencies linked to its ecosystem, such as Aave or Sushi, have seen strong gains since the beginning of the week. It is noticeable that even Ethereum’s competing projects, which deal with decentralized finance or tokenization issues, are doing better than Bitcoin lately. This is the case, for example, of Cardano (ADA), Polygon (MATIC) or Avalanche (AVAX). With so many developments and possibilities around these projects, Bitcoin is struggling to stay in the spotlight. Is there a turning point in the market that will lead to a greater influence of the Ethereum universe at the expense of Bitcoin? The question may be asked.

• According to CoinGecko, the market capitalization is down to under $2000 billion from $2550 billion last week.

• Bitcoin’s dominance continues to fall to 38% market share from 42% last week.

• The best performance of the top 50 is attributed to Polygon (MATIC) with +123% over one week.

We invite you to discover our video analysis (in french and dated May 18):

Bitcoin (BTC)

The Coinhouse recommendation :
Buy

• Bitcoin is down nearly 30% on the week to around €32,800 ($40,000) on May 19. This is now the largest correction seen since March 2020. The price has just fallen below our first buy zone, with the break of the €34,500 ($42,000) support. The last thing you want to do in these market phases is to keep your eyes on the price, panic and sell on lows. Take a step back and keep in mind that we are coming from an uptrend. Until proven otherwise, the current price zones remain opportunities for gradual buybacks (the Dollar Cost Average technique). The price is currently in a potential rebound zone, between €30,200 and €33,500 ($37,000 and $41,000). We are doing some buying here, but keeping some capital in case the downturn continues. It is possible that the price will work through the price levels seen in January. However, if it breaks below the $29,000 support, the whole bull market will be seriously challenged.

Ethereum (ETH)

The Coinhouse recommendation :
Buy

• Ethereum (ETH) also corrects by 29% this week and comes back to quote around €2,450 ($3,000) this May 19th. But this drop comes on the heels of a powerful rally. Ethereum’s price has also fallen below our first buyback zone of €2,600 to €2,700 ($3,150 to $3,300). The price action shows a stronger bearish movement compared to the last months. We are therefore once again adopting the gradual buyback technique. If the correction continues, we will proceed to new purchases on the price zone located between €1,960 and €2,250 ($2,400 and $2,750). The underlying trend remains bullish on Ethereum despite this week’s decline.

Uniswap (UNI)

The Coinhouse recommendation :
Buy between $26 and $30

• Uniswap (UNI) is also down 20% this week. The asset is trading around €24.60 ($30) on May 19. The price has reached an interesting buying zone between €21.30 and €24.50 (26 and $30). However, we must remain cautious and only buy gradually as the price is potentially breaking down a bullish channel in which it has been moving since February. If bullish recovery signals are confirmed on the whole market, then we can proceed to more aggressive purchases on UNI to play a return of the price towards its historical highs.

Tops & flops of the week (top 50 marketcap)

Tops

1- Polygon (MATIC): +123%
2- Sushi : +33%
3- Aave: +33%

Flops

1- Shiba Inu (SHIB) : -57%
2- EOS : -42%
3- QTUM : -41%

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