In the past week cryptocurrency markets faced quite a hefty correction. The bearish market, which was triggered by Elon Musk’s announcement that Tesla is halting Bitcoin payments citing environmental concerns as the reason, caused the total market capitalization to drop by a whooping $400 billion from $2.45 trillion on May 9 to $2.05 trillion on May 16. Nevertheless, some projects, such as Cardano (ADA), Kusama (KSM) and Polygon (MATIC) managed to defy the general downtrend by posting gains of over 10% in the last seven-day period. Will the bearish market continue throughout week 20? Which cryptocurrencies are the most likely to rebound or defy the general trend? We recommend you to read our this week’s top 3 coins to watch article, in which you will find a diverse selection of cryptos worth keeping an eye on this week.
1. Bitcoin (BTC)
Although we believe Bitcoin does not need much introduction and that all eyes would be on it even if it were not featured on our list, here is a short summary of the history and key characteristics of the first truly decentralized digital currency. The world’s pioneer cryptocurrency was launched by pseudonymous figure named Satoshi Nakamoto in 2009 and has a capped supply of 21 million coins. The decreasing miner block rewards makes the cryptocurrency scarcer with time, ensuring a deflationary nature.
BTC Dominance is Dropping but Fundamentals Remain Strong
One tweet form Elon Musk sent BTC down from $54.7k to under $45k, and the whole market with it. The immediate and undisputed effect that the Musk’s tweet had on BTC price, is best seen from this price chart:
BTC is down by over 20% over the last week, and with BTC depreciation, the BTC dominance continues to drop. While Bitcoin dominance stood at over 70% at the beginning of the year, the percentage has been dropping steadily over the last few months, indicating that more money has been flowing to altcoins as compared to Bitcoin. Currently, the BTC dominance is just over 40%, but several analysts are convinced we are headed towards the low 30s, an all-time low BTC dominance.
Despite the drop in the BTC’s price and with it, its share in the total cryptocurrency market cap, Bitcoin fundamentals are still firm and there is a strong case that BTC can still pump to 6-digit territory. First and foremost, BTC holdings on exchanges are still dropping, indicating investors are not interested in selling or trading their BTC. These so-called strong hands or long-term holders comprise mostly of institutions and whales (holding over 1000 BTC) are additionally accumulating precious BTC. While after the Musk’s tweet, inflows on exchanges started piling up the trend has soon reversed and there was a net BTC outflow from exchanges. In addition, the recent price dump “reset” the NVT chart values. When the NVT Ratio (Network Value to Transactions Ratio) is high, it indicates that its network valuation is outstripping the value being transmitted on its payment network. In other words, Bitcoin’s valuation now better corresponds with the total value its network transmits.
To conclude, a 30% correction from ATH price is healthy and even something that should be expected, especially considering how fast we moved up, as every exponential move needs an accumulation break. Perhaps this one is the one we need to move to 100k.
2. Dogecoin (DOGE)
The cryptocurrency Dogecoin was introduced as a joke in December 2013 by Billy Markus. Markus built the cryptocurrency project around the Shiba Inu doge meme that went viral in 2013 and the Dogecoin even uses the Doge meme as its official logo. Surprisingly, the currency took off. Even more, it developed a relatively large community on social platforms such as Reddit, which used Dogecoin to tip other members of the community and for performing similar micro-transactions. The Dogecoin community also raised funds to sponsor their own NASCAR racer for a few races and pay for a physical gold Dogecoin to be delivered to the moon via crowdfunding.
What are Elon’s plans for DOGE? Will we see DOGE exceed $1 soon?
Dogecoin’s price is, much like Bitcoin’s, but to an even greater extend, affected by Elon Musk’s twitter activity. Pumps of 20% or more are not uncommon when Elon tweets about DOGE, so considering the frequency and timing of Elon’s tweets, it is definitely a coin to watch. For example, Musk asked his Twitter followers whether Tesla should start accepting DOGE payments on May 11, resulting in a minor DOGE pump. On May 14, he tweeted that he is “working with Doge devs to improve system transaction efficiency.” According to Tradingview, the total Dogecoin market capitalization increased by $10 billion following the May 14 tweet. But Musk’s influence goes both ways! When the CEO of Tesla appeared on SNL last weekend, DOGE dropped from around 70 cents to under 50 cents. The reason – Musk called Dogecoin “a hustle” and failed to promote the coin as many holders expected him to do.
What does Elon have in store for this week? Will he help push the coin to the storied $1 mark? While many cryptocurrency investors hate Musk for making the whole crypto sector look like a joke, he has without a doubt became one of the most influential sources of crypto indices. The bottom line is that the price of DOGE depends on other factors than the general crypto market sentiment and could end up the week in the green, even if the whole sector is on its way down. All it takes is a couple of tweets from some influential entrepreneur. Nevertheless, Dogecoin, which is currently changing hands at around $0.50, would have to double its price to reach $1.
3. Polygon (MATIC)
Polygon, previously known as Matic Network is an Ethereum Layer 2 scaling solution that aims to provides major scalability improvements. The Polygon protocol plans to deliver supersonic speeds and throughput by utilizing a modified version of Plasma. Its Layer 2 solution consists of several simultaneously run Proof-of-Stake sidechains that regularly push the data to Ethereum, creating network checkpoints.
MATIC trading launches on Kraken on May 17
Major cryptocurrency exchange Kraken revealed on May 14 that it will list MATIC along with two other cryptocurrencies. Trading of assets will commence on Monday, May 17, at approximately 15:30 UTC. In addition, Polygon is pushing forward with continued development of its Layer 2 protocol. Considering this, a Mumbai testnet upgrade will kick off at block number 13996000. Both events listed above might provide a short-term boost to the MATIC token valuation, but the project’s long-term perspective is also looking good as Polygon’s Layer 2 solution is currently one of the most perfected Ethereum scalability solutions available. With average Ethereum transaction fee often exceeding $20, Layer 2 solutions are of high importance. This is likely going to stay that way at least until Ethereum 2.0 is fully deployed. MATIC also boasts with outstanding past price performance. The token, which is currently trading at exactly $1.50 is up by 45% in the last 7 days, 250% in the last month and 7,300% in the last year.
Andrew is a writer that does most of his work on cryptocurrency-related topics. While he’s primarily interested in Bitcoin, he also follows major altcoins and the innovative ideas that new cryptocurrency and blockchain projects are bringing to the table.