Bitcoin is holding up better than stocks. But it could still drop below $20,000 soon.
and other cryptocurrencies have held up better than stocks against recent market pressures, a bullish signal that belies the fact that digital assets appear to be losing momentum and could soon decline sharply.
Bitcoin price rose 1% to top $21,300 on Tuesday, rising slightly after a Friday selloff plunged the biggest crypto from above $23,000 to below $21,000. The weakness at the end of last week was accompanied by a stock market rout, which was repeated on Monday when the
fell 2.1% in its worst day since June 16.
“Bitcoin’s weakness, however, does not match the selling pressure hitting stocks, which could be a sign that investors are not ready to see prices retest June lows,” said Edward Moya, an analyst at the Oanda broker. “Normally a day like [Monday]Bitcoin’s percentage loss would easily outpace S&P 500 weakness.”
While cryptos should, in theory, be uncorrelated assets, they have been found to be largely linked to other risk-sensitive bets, such as equities and especially tech stocks in the
index. Recent declines in tokens and equities have been linked to investor fears over inflation and central bank policy, particularly whether the Federal Reserve will continue on its path of aggressively raising interest rates to rein in high inflation. .
Fed Chairman Jerome Powell’s speech at the Jackson Hole economic conference on Friday may provide the market with much-needed clarity on the central bank’s trajectory. This will likely be the most important catalyst of the week for stocks and cryptos.
As Powell’s speech draws closer, investors in digital assets may be keen to take the relative strength of Bitcoin and its peers over the past day as a bullish signal. But it may be premature to ignore the recent loss of momentum that saw Bitcoin prices fall from last week’s high above $24,000 — the highest consistent levels since a selling off in mid-June pushed Bitcoin off the $30,000 cliff.
“Bitcoin is now below its 50-day moving average after a sharp decline at the end of last week. Selling is associated with loss of short-term momentum, increasing risk in the long-term downtrend” said Katie Stockton, managing partner of technical research firm Fairlead Strategies.
This loss of momentum puts the biggest digital asset in a vulnerable position that could see it fall below $20,000, according to the analyst.
“Near-term oversold levels should produce a few days of stabilization, after which we expect retesting and a potential breakout below long-term support in the $18,300-$19,500 range,” Stockton added. “The bearish momentum is building from a long-term perspective, supporting a long-term bearish bias.”
the second largest crypto, gained 2% to $1,600. Smaller tokens or altcoins
both were up almost 3%. Memecoins, which were blockchain projects initially based on internet jokes, have also been on the rise, with
3% in the green and
Write to Jack Denton at [email protected]