Crypto market rallying amid Solana outage and OpenSea accusations
Crypto market lost $1 trillion from market cap during Black Wednesday week
The over-leveraged crypto market has been reset as $1 trillion in value was wiped out — Market Watch Weekly
Last week, the cryptocurrency market suffered its worst flash crash in more than a year. The total market capitalization fell to $1.467 trillion from May 12’s peak of $2.585 trillion, a drop of more than 40%. BTC dropped to as low as 29,000 USDT on Black Wednesday per OKEx spot price — its lowest level since Jan. 22. While the closing of short positions and spot buying allowed the price to recover a bit over the weekend, BTC still recorded a negative 23% return last week.
Wednesday’s sell-off has caused BTC to completely lose its support at the 200-day moving average, and it has been running below this bull/bear threshold for five days — which is longer than any previous time a bull run resumed after falling below.
Trading sentiment on OKEx remained subdued over the weekend as BTC futures open interest didn’t see any pickup and as the funding rates of perpetual swaps are now completely reset.
Asset managers turned bearish ahead of price dive
On the institutional side, CME updated the latest (as of May 18) Bitcoin futures position data on May 22. In this reporting period, BTC retraced over $14,000, and it’s worth noting that the first trading day after this reporting period was Black Wednesday.
The open interest during this time saw a steady uptick from 8,469 to 9,522 contracts (with a standard contract being 5 BTC). This OI rebound came after more than one month of declines.
Meanwhile, asset-manager accounts saw their long positions increase slightly, from 383 to 393 contracts, while their short positions jumped from 910 to an all-time high of 1,085 contracts. This indicates that asset managers turned bearish in the last reporting period and made the right call before the price dive.
However, leveraged funds largely increased their long positions, from 2,319 to 3,279 contracts, while short positions went up from 5,419 to 6,136. With the share of long positions on the rise, it would appear that leveraged funds could not avoid the sell-off.
Major altcoins generally lost 50%
Major altcoins dropped significantly, and 40%–50% weekly losses were commonly seen on the charts. ETH performed slightly better, with "just" a 38% drop for the week, but lost around 60% of its value from its top.
As a result, the Altcoin Season Index, which has been on an upward trend this year, took a violent hit, slipping rapidly from Tuesday’s high of 98 to 78 on Sunday. Meanwhile, Bitcoin dominance rebounded from nearly a three-year low of 40% to the current 48%, as per data from TradingView.
Locked value in DeFi saw a big pullback
The total value locked in DeFi, dominated in USD, slipped sharply from $80 billion to $50 billion in a span of the week, according to data from DeFi Pulse. The drop is in line with the declining percentage of ETH's value.
In terms of weekly returns, none of the major DeFi tokens have fallen by less than 30%. Meanwhile, Yearn Finance announced a YFI token purchase worth $1.47 million during the downturn.
Looking ahead this week
Minutes from last Wednesday's Fed meeting revealed an interesting message, as market expectations for inflation gradually retreated but concerns about early tapering began to pick up. The three major stock indexes rebounded after moving lower in the first half of last week, and the Volatility Index — or VIX — fell back after Wednesday.
Consumer confidence and new home sales data will be released next Tuesday. Due to the lack of macro guidance, institutional investors will turn their attention to the Federal Reserve FOMC meeting in the middle of next month.
As for BTC, this new week may bring some price recovery as trading volumes return to the market after a second dive during the weekend.
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