The crypto market has rebounded since its crash earlier this month, and investors sticking to the asset class are returning to Bitcoin (BTC-USD) and other major cryptocurrencies like Ethereum (ETH-USD) and Cardano (ADA-USD).
Combined with the collapse of Terra’s (UST-USD) algorithmic stablecoin and the selling pressure in stocks and bonds, investors sold approximately $640 billion in crypto assets, or more than 35% of the asset class’s total value, between May 4 and May 12. .
Volatility for crypto is nothing new, Grayscale CEO Michael Sonnenshein told Yahoo Finance on the sidelines of the World Economic Forum last week.
“From what we’ve heard from investors, recent sales … haven’t deterred them. “If anything, they are looking at it opportunistically,” said Sonnenshein, who has seen the crypto-focused investment partnership’s assets shrink by more than half since the start of the year.
Currently trading over $31,500 per coin on Tuesday afternoon, Bitcoin has seen an increase of 9.23% in the past five days. Over the past few weeks, investors’ asset preference has also increased sharply. From May 10 to May 31, Bitcoin’s market cap relative to the total crypto-asset class rose almost 6%, a quick sign that investors are looking for less crypto risk.
According to TradingView, Bitcoin currently accounts for almost 47% of crypto’s value. This is its highest point since October 2021. Since April 2021, Bitcoin’s value relative to the crypto market has remained below 50%.
In a note from Arcane Research published Monday, Bitcoin “still outperformed most of the crypto market,” even though it ended up down more than 16% from where it was on May 1.
Compared to stock indices, the largest cryptocurrency still suffers significantly more losses. By noon on Tuesday, Bitcoin lost more than 33.6% of its value to date, much worse than the S&P 500 (13.44%) and the Nasdaq (-23.27%) in the same period.
But as a recent report from Sonnenshein and RBC noted, such a decline is not uncommon for the asset. According to the report, Bitcoin has fallen by at least 20% or more in “about 80% of its history”.
Created after the 2007-2009 financial recession, Bitcoin was originally designed to be used as electronic cash. Over the years, many of its advocates have changed this view, with the majority seeing it as a store of value – essentially “digital gold.”
The coin’s value has increased significantly since the pandemic, as it traded for less than a cent a little over 10 years ago. However, the investment use case for portfolio diversification has declined in the short term as its correlation with other risky assets continues.
Data from Coinmetrics shows that while Bitcoin’s 30-day correlation with the S&P 500 fell during the May selling period, it is still above its highest point since March 2020.
“A lot of people criticize it for not becoming a mainstream currency, going to buy a cappuccino, paying your rent, and stuff like that. But if Bitcoin is successful – and already largely very successful – there is nothing wrong with the stand-alone use case being digital gold, gold 2.0, gold for the new and younger generation,” added Sonnenshein of Grayscale.
Other major cryptocurrencies of interest to investors include Ether and Cardano.
Ether is trading at $1,936, down more than 48% year-over-year but up 8% over the past five days. Meanwhile, Cardano’s native crypto, ADA, is showing the biggest gains of any larger cryptocurrencies by market cap. It’s currently changing hands at over 61 cents, more than 25% from its level five days ago.
David Hollerith covers cryptocurrency for Yahoo Finance. follow him @dshollers.
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