Crypto Market Slides as Volatility Grips Both TradFi and DeFi Sectors

The cryptocurrency market began the week in the red on Monday, May 19, as both the traditional and decentralized finance sectors continue to experience volatility.

Bitcoin (BTC) fell 1.2% on the day to $104,000, where it has been hovering for the past week. Ethereum (ETH) dropped by 4% to $2,463, easing slightly after last week’s strong rally driven by the Pectra upgrade.

Solana (SOL) recorded sharper losses, decreasing nearly 7% to $164, while XRP is down 3.8% to $2.35.

The total cryptocurrency market capitalization is down by 3.5% on the day to around $3.42 trillion. Leveraged liquidations amounted to $633 million during the same time period, according to CoinGlass. ETH continued to lead liquidation with $258 million, followed by BTC at around $161 million.

Spot BTC exchange-traded funds (ETFs) attracted approximately $260 million in inflows on May 16, while Spot Ethereum ETFs brought in $22 million in inflows, according to SoSoValue data.

“We are in a period of high uncertainty, where even traditional financial markets have become highly sentiment-driven,” Dr. Kirill Kretov, CoinPanel, said. “In crypto, the situation is even more fragile; liquidity has been largely withdrawn, leaving the market thin and highly susceptible to sharp moves.”

Dr. Kretov explained that this environment is ideal for large players to profit from short-term volatility, rather than relying on long-term directional bets.

“We are going to continue operating in this highly volatile environment, where anything below a 5% move should be treated as noise,” he said. “Learn to extract profits from this volatility, because only when the majority of market participants adjust to this reality will the market structure begin to change.”

Digital asset investment products

Meanwhile, digital asset investment products recorded $785 million in inflows last week, bringing year-to-date totals to $7.5 billion and fully recovering the outflows recorded between February to March, according to CoinShares’ weekly fund flows report.

Bitcoin led the way with $557 million in inflows, though this marked a decline from the previous week. The report notes this is likely due to continued hawkish signals from the Federal Reserve.

However, it was Ethereum that stood out with $205 million in inflows, again driven by the Pectra upgrade. In contrast, Solana was the only major asset to experience outflows, totaling $0.89 million.

The U.S., Germany, and Hong Kong led the inflows, while Sweden, Canada, and Brazil experienced modest outflows.