Bitcoin and Ethereum Are in a Recovery Phase, but Returns Have Greatly Declined 

Following the collapse of UST and LUNA, the cryptocurrency market has entered a consolidation period. The global crypto market cap currently stands at $1.30T, an increase of 1.70% over the last day. Over the past 24 hours, the crypto market volume has increased by 25.93% to $71.42B

BTC Retraces to the $30K Level

Both BTC and Ethereum returns have declined, as shown on a Glassnode report. Notably, the recent market decline has put a significant dent in the assets’ performance.

Bitcoin traded within a tight range between a high of $31,200 and a low of $28,713. For the eighth week in a row, the Bitcoin market has traded lower, the longest streak of red weekly candles in history. Traders held the support at the $28,630 level on May 20, signifying that the bulls are in a buying mood. The price then moved above the downtrend line, which is a sign of a recovery.

If the price continues to move above the downtrend line, it could push the price higher to the 30-day exponential moving average of $31,758. A clear break above the key resistance levels of $30,450 and $30,600 would trigger a strong rally. The next resistance level is at $31,500, which will take the price to $32,500.

If bitcoin fails to break the key resistance levels of $30,600, it could cause a fresh decline. The support level is at the $30,000 area. The next significant support is at the $29,850 level.

The price is currently trading below the 50% Fib retracement level of its upward movement from the $29,225 to $30,500 high. If it breaks below this level, it could cause the price to move toward the $28,500 support.

ETH Price Is Back Above $2K

The price of Ether bounced off the rising trend line on May 21. The bulls are now eyeing the next resistance at $2,159. On the other hand, the bears are still expected to challenge this level.

If the price breaks below the resistance level at $2,159, it could drop to the next support level at $2,040. This level is an essential support in the short term.

If the price breaks above the rising trend line, it could increase the chances of breaking above the next resistance level at $2,159 and then rally to $2,500.

On the other hand, if the price breaks below the support level at $2,159, it could drop to the next support level at $2,040. A break below this level could trigger a short-term decline to the next support level at $1,700.

Diminishing BTC and ETH Returns

According to an assessment of the derivatives markets, the fear of further downside remains. On-chain, both Bitcoin and Ethereum have experienced multi-year lows in block space demand. The burning rate of both cryptocurrencies via EIP1559 has also reached an all-time low. Notably, despite the differences between the two assets, their correlation remains strong. 

Bitcoin typically trades within a four-year bull/bear cycle, often associated with the halving event. The CAGR has declined from over 200% in 2015 to less than 50% today due to this long-term compression. 

The decline in 4y-CAGR following the May 2021 sell-off seems to be the main factor that triggered the bear market trend. Although it is marginally worse than the decline during the 4-Dec deleveraging, it is not as severe as it was in May-July. This period of lacklustre returns is usually associated with high volatility events such as the beginning and the end of bear markets.