Market Wrap: Cryptos Slide; Analysts Expect a Volatility Spike

It has been a choppy trading week for cryptocurrencies, which kept some buyers on the sidelines. Stocks were also under pressure as tensions between Russia and Ukraine escalated.

On Friday, a fire broke out at Ukraine’s Zaporizhzhia nuclear power plant, and conditions around the facility remain unstable. The incident kept global investors on edge, contributing to further gains in oil prices and traditional safe haven assets such as gold and the U.S. dollar.

Bitcoin (BTC) briefly dipped below $40,000 on Friday, and is up 2% over the past week, compared with a 4% decline in ether (ETH) over the same period. Bitcoin's outperformance relative to altcoins suggests a lower appetite for risk among crypto investors.

Technical indicators are mostly neutral for bitcoin, although a significant loss of upside momentum on long-term charts points to continued selling pressure. Still, the cryptocurrency could stabilize around the $37,000-$40,000 support zone over the short term.

"I am cautiously optimistic," Timothy Brackett, a technical analyst at The Markets Compass, said during an interview on CoinDesk TV's "First Mover" show this week. Brackett pointed to signs of improving short-term momentum and key support levels that have kept the bull market intact over the long term.

Meanwhile, other analysts suggest volatility could increase this month, which could trigger additional price swings.

Latest prices

●Bitcoin BTC$89,229.75: $39,418, −5.96%

●Ether ETH$3,011.54: $2,610, −6.74%

●S&P 500 daily close: $4,329, −0.79%

●Gold: $1,971 per troy ounce, +1.90%

●Ten-year Treasury yield daily close: 1.72%

Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.

The chart below shows a decline in bitcoin's trading volume across spot exchanges, according to CoinDesk data.

Typically, large volume spikes during sell-offs coincide with price lows. Over the past few months, volume spikes have been minor relative to the May 2021 extreme. Further, long liquidations and open interest in the bitcoin futures market remain steady, indicating little reaction among market participants to recent price moves.

Potential volatility spike

"Despite the huge amount of uncertainty in the market, option volatility is relatively cheap year over year," Gregoire Magadini, co-founder of Genesis Volatility said during an interview with CoinDesk.

"BTC volatility is known to spike on price drops. May 2021 is a perfect example. I think the potential for an upside volatility spike is being underestimated by the market," Magadini said. He also expects the futures basis to rally from 3% to 15% in the coming months, especially if spot prices move higher.

"We added to our longer-term options position, selling the volatility spike post-invasion," QCP Capital, a crypto trading firm, wrote in a Telegram chat, referring to Russia's invasion of Ukraine. The firm has been tactically accumulating a long volatility position, "expecting outsized volatility" going into the U.S. Federal Reserve meeting March 16-17.

Altcoin roundup

• Algorand upgrade: The Algorand blockchain released a major technical upgrade designed to support cross-chain interoperability and allow developers to easily build complex decentralized applications (dapps) based on its network. The upgrade introduces smart contract-to-contract calling, which allows applications to efficiently interact with other smart contract-based products. Algorand's ALGO token is down 4% over the past week, compared with a 3% gain in BTC over the same period. Read more here.
• CVS enters the metaverse: The drugstore chain plans to offer virtual prescription drugs, wellness products and other merchandise authenticated by NFTs. CVS (CVS) lays claim to “downloadable virtual goods, namely, a variety of consumer goods, prescription drugs, health, wellness, beauty and personal care products and general merchandise for use online and in online virtual worlds." Metaverse tokens including Decentraland's MANA and The Sandbox's SAND are down as much as 6% over the past week. Read more here.
• ANC powers on: Anchor, the decentralized money market, remained in the spotlight after its ANC token gained 22% over the past 24 hours. Henrik Andersson, co-founder of Australia-based crypto-asset investment firm Apollo Capital, said that ANC's rally is due to a combination of ANC offering a high annual percentage yield (APY) and talks of new tokenomics.

Relevant news

• US Jobs Up 678K in February, More Than Expected, Adding to Price Pressures
• Shake Shack Offering Bitcoin Rewards for Customers Using Block’s Cash App: Report
• Coinbase Says Crypto Markets Resilient After Russian Invasion of Ukraine
• Bitcoin Miner Mawson Signs Second Hosting Deal in a Week
• Manchester City Soccer Club Signs Deal With Crypto Exchange OKX

Other markets

Digital assets in the CoinDesk 20 ended the day lower.

Largest losers:

Asset Ticker Returns Sector Internet Computer ICP −8.1% Computing Litecoin LTC −7.2% Currency Cosmos ATOM −7.0% Smart Contract Platform

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.